Free markets do not necessarily mean that everyone has equal access to information. We've got market regulations so that less sophisticated retail investors have a chance against the more sophisticated / secretive groups with more money / knowledge / power than us.
A laissez-faire market would encourage secrets as a means to protect ones own capital. To force some people to give up secrets (ie: regulations against insider trading) is itself, a regulation, that already moves us away from truly free markets.
Which is a good thing. I think a laissez-faire market is naive. There's benefits to free markets, but also downsides. We as a society should try to build systems where we get the benefits of free markets, but place regulations on the behaviors that cause societal harm.
These rules and regulations we as a society follow (and ideally enforce) have problems. But the way to fix things is to improve the rules so that they're fairer and more comprehensive. Maybe some rules are too hard to be enforced and should be tossed away (even if in a hypothetical perfect world, they'd be net-beneficial... if its too hard to implement or enforce, then there's no point in practice).
"Insider Trading among Congressmen" is more of the latter IMO. We all would like it if Congressmen played by the same rules we did. But in practice: how would we even write a law that hampers this behavior from Congressmen? Who will keep track of which stocks Congressmen are trading, and which committees they are a part of?
If we can't enforce the rule, then the rule doesn't exist (even if we write down the law into our code or even the Constitution, without enforcement, the law is meaningless)
"But in practice: how would we even write a law that hampers this behavior from Congressmen? Who will keep track of which stocks Congressmen are trading, and which committees they are a part of?"
That's pretty easy, actually.
Congresscritters are Federal employees. They already fill out lots of forms for salary and healthcare and expense reimbursement... so you add:
1. a Form 3 equivalent to register all the interests that they hold on day one, with a list of brokerages that they have accounts at. An accurate form would be a requirement to collect any salary or reimbursement.
2. an authorization sending copies of all trades to an forensic accounting office, perhaps under the auspices of the IRS. Again, don't fill this out means not collecting your salary.
3. a warning that all trades while you are a Congresscritter must be made with a 10b5-1 plan or be pre-emptively considered insider trading
There we go. While we're at it, extend this to all the positions appointed by the executive branch and confirmed by the Senate.
Laws only have to be applied fairly. In this case, congress cannot hide their purchases for months before disclosure. They are a representative of the people or their state. The people must know immediately about their backdoor dealings.
Immediate release will cause some gamification of the market. But it will also attract strong monitors on bad faith congresspeople.
Any "insider trading" law is about insider disclosure __BEFORE__ you purchase and/or sell your stock options.
The idea is: if (Insert CEO here) sells $50-million worth of stocks, we give the retail investors a chance to sell _BEFORE_ the big guy does. The CEO has to announce _far_ in advance, so that we have a chance to think "Wait, maybe this CEO is full of crap. Maybe I should sell too." (or not: maybe the CEO just wants a new party yacht. But giving people the information and opportunity to decide for themselves is what the insider trading laws are all about).
It doesn't matter if Congressmen disclose 1-day or 1-month after-the-fact. They've already benefited from the insider trade and its too late for the retail investor to benefit. Any investor who purchases after-the-fact just pumps up the stock price (making the Congressmen richer). And on the flip side: the Congressmen sells at a higher price than retailers who get "in late" to the game.
For insider trading laws to have teeth, we must push for disclosure ahead of time. But what stocks "count" as a Congressman's insider trade? Maybe any and all stocks count.
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At which point: our goal should be to push for 3-month disclosures from all Congressmen, for all publicly traded securities (stocks, commodities, etc. etc.). You see? This proposal has teeth. This has practical effect. Ex: no Congressman can ever buy, or sell, a security, without filing a disclosure at least 3 months ahead of the buy and/or sell date.
This "disclose sooner" idea does nothing. You gotta think about what you want out of a law before you start writing it.
Note: This is also a horribly "non-free" law. We force Congressmen to act by different rules than the rest of us. That's fine and good. Its an acknowledgement that they have more money, knowledge, and power than us. Its an acknowledgement that we need to level the playing field against them... even if we have to use non-free / highly selective laws that "discriminate against Congressmen".
One thing we don't alwayd consider is that the free market always adjusts. So trading and the stock market without insider trading regulations may not look anything like what we have now. It may not even exist.
E.g. If I knew it to be trivial to manipulate stocks and gain from it using insider knowledge I'd be a lot less inclined to participate or put my capital into such a machine. For all we know some weird market may form around such knowledge.
I thought about it for a long time and every time I see people talk about a free market they just mean less government intervention forgetting that we live in nature. Nature leaks into markets and what we get is a market of the "strong" until people notice that physical power and financial power are not the same and a revolution occurs.
That's only for HNWI and hedge funds.