Sometimes people argue that insider trading is good. We want market prices to be accurate, to reflect all available information; that way the best projects will get financed and people will be able to buy and sell assets at prices that reflect their real values. Letting, say, corporate executives buy their stocks when they know good news is coming, or sell them when they know bad news is coming, makes prices more accurate. So we should encourage it. That is the theory. You don’t hear it a lot these days about the stock market, but you do hear it sometimes. Here’s a recent Planet Money episode halfheartedly making the case.
Outside of the stock market, though, this idea is more popular. “In boxing, it’s generally accepted — if not condoned — that [managers] sometimes bet on their fighters to win,” the Wall Street Journal noted last month, though other bets can lead to suspicions of manipulation. Other sports sometimes have stricter rules about insider betting, but not always.
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