Document Type

Article

Publication Date

2016

Abstract

This Article proceeds as follows: Section I sets the table by dismissing the notion that economic analysis of law should enjoy some privileged status (as more precise, rigorous, or scientific) over ethical analysis of law. Rather, it is suggested that economic and ethical reasons are best understood as different tools suited for different roles in legal reform. It is then argued that, given the current climate, ethical reasoning is the best tool for overcoming the remaining obstacles to insider trading reform in the United States. Section II begins the ethical analysis by arguing that even if it were admitted that insider trading harms society and is morally wrong, the current enforcement regime would still be unjust, incoherent, irrational, and in desperate need of reform. Section III proposes the legalization of issuer-licensed insider trading as one effective means of reforming the current regime but anticipates the "it's just not right" objection. Section IV confronts the "it's just not right" objection on its own ethical terms and demonstrates that, while it is true that some forms of insider trading are not morally permissible on either consequentialist or deontological grounds, issuer-licensed insider trading is morally permissible. Nevertheless, some object to insider trading, not on consequentialist or deontological moral grounds, but because it reflects the vice of greed. Section V closes by addressing this ethical concern. It is argued that criminalizing issuer-licensed insider trading is not only a poor means of combating the character flaw of greed, but that criminalization on such grounds would be moralistic (like laws against sodomy or same-sex marriage) and would therefore conflict with our society's increasingly shared repugnance toward such laws. Finally, if our criminalization of issuer-licensed insider trading cannot be justified on moral or ethical grounds, it must be explained. Some have suggested that society's envy of those who earn "easy money" offers the explanation. However, envy is perhaps the worst of all vices, and the Article closes by cautioning against its seduction.

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