Hey, it’s a new topic!

The SEC charged billionaire Mark Cuban with insider trading. He denies the charges. I despise the inevitable schadenfreude. (Read the comments at the link. We’re a nation of envious, success-hating malcontents.)

I have no idea whether or not Mr. Cuban did what the government alleges. Maybe he did, or maybe the conspiracy theories about political payback are true. The latter is too transparent to pass my skepticism, but I never underestimate government’s ability to be nakedly vindictive. If it’s the former I do not care because I think insider trading should be legal. I wrote a paper for my business school ethics class making that case. I’m an unrepentant libertarian at my core.

The gist of my support rested on the idea that, if markets are efficient, then more information is better than less information. I don’t want to pretend that markets are efficient in the short-term; they’re not. But they’re less inefficient than anything else in the short-term. In the long-term, I trust markets completely. (Your time horizon may vary.)

Nor do I wish to pretend that the information resulting from insider trading is easy to get at or evident to everyone because there’s never going to be information equality. That’s okay. Hard work to gather information – and the mind to organize and filter that information – deserves a reward.

Consider the opposite of what the government argues. If an investor is ready to pull the trigger on a stock purchase but uncovers bad news, she’ll refrain from the purchase. She’s used the information to her advantage. Is that unethical? I don’t believe it is, nor can I imagine anyone suggesting otherwise. However, the facts alleged by the government in cases like that now pending against Mr. Cuban suggest an entirely different ethical code to avoid a loss on a possession than a potential acquisition.

I’ve over-simplified in my hypothetical. There’s far more intricacy than I understand. Conceded. But the case for insider trading laws partially rests on a suspension of self-interest, of self-sacrifice for the benefit of others without regard for how self-interested behavior may benefit others. That is not rational.