[lambdapie]

I didn't understand that article, probably because I'm unfamiliar with the author's other works. Is he proposing that a company be allowed to set rules regarding insider trading during the IPO? If so, I agree that in theory this would be efficient (or in the author's terminology, it would be acceptable from a consequentialist POV). But this is orthogonal to the issue. The people who want to ban insider trading would most argue that insider trading is inefficient, and therefore companies would choose not to issue stocks like this. And if they are right, we would still be in the same situation, it's just that instead of people violating a rule created by the government in order to maximize utility, they would be violating a contract created by the company in order to maximize the company's IPO price (which also happens to maximize utility).

Am I missing anything else? Did the author make a specific argument for why insider trading would prove to be efficient (i.e. why the effect on liquidity outweighed the increased information revelation?) I doubt it since the author's language suggest someone familiar with law and philosophy but not so much finance and econ.

[ikeboy]

The argument is that instead of having the government decide what's best, the company should decide (and it doesn't need to be during the IPO). Then, the so-called "free market" will decide whether it's good or bad. If they decide it's bad for companies, then companies won't allow it, because it will hurt their stock price. If they decide it's good, then companies will allow it.

[lambdapie]

Why is free market in scare quotes? And why "so-called"?