You’ve probably heard the Henry Manne argument that insider trading is good because it leads to better price signals, and because it would facilitate “corporate entrepreneurship.” Donald Boudreaux has argued that repealing insider trading laws could for a more efficient form of whistleblowing as executives, directors, etc., dumped the stock of companies they know to be rotten from the inside.

In my latest column for The Daily, I endorse Amar Bhidé’s argument that insider trading laws are a bad idea precisely because they work, i.e., they’ve fueled the rise of anonymous and fragmented ownership of public companies. I try to make the case for what some call relationship finance as opposed to the arm’s-length finance that defines our public equity markets. The basic idea, per Amar, is that we’d be better off if corporate finance worked more like venture capital, where investors get their hands dirty with new investments as a matter of course.

I’d love to hear what you think.