The case for outlawing insider trading is even weaker than it was with alcohol. The latter did in many cases inflict real damage—to careers, family relationships, livers. Insider trading not only does no harm, it can have significant social and economic benefits including a more accurate pricing of stocks.
As I read Thomas Piketty’s Capital in the Twenty-First Century, one of the (several) flaws that stands out is Piketty’s seemingly complete obliviousness to the realities of what Manne called – in a pioneering April 1965 article in the Journal of Political Economy – the “market for corporate control.” Henry Manne is not the only scholar to explain the realities of financial markets to those whose uninformed priors lead them to wickedly mistaken conclusions. But none is better than Henry, and very few are as good.
