> The more information in a market, any market, the more efficient prices become. If informed investors start buying or selling based on privileged information, asset prices will rise to their “correct” level<p>This belies a clear misunderstanding of statistical mechanics. Markets are not purely random systems: they are regulated, and they are fictions of human imagination, unbounded by physical constraints. Two things come out of this: 1) certain pieces of information are fantastically more powerful than others 2) the author doesn't seem to realize that, in statistical mechanics, every particle, actor, whatever, has or doesn't have each piece of information. You introduce insider trading, and all of a sudden, you have a new variable, and every other particle, or actor, has a value of zero, except that one who has it. Privileged information actually decreases the information density in the market.<p>> Fraud will be exposed earlier. ... Enron ... If insiders were selling we would’ve seen a much swifter move down, and probable fraud exposed.<p>Pure supposition.<p>> Companies will either become more transparent, to keep the retail investor happy, or will themselves enforce secrecy rather than being complacent with the idea that the law somehow protects their secrets.<p>Show me how either of those necessarily falls out of any real theory of behavior, information theory, any mechanics, anything.<p>> More enforcement dollars will be used to uncover actual frauds such as the next Enron or Worldcom.<p>WHAT? ARE? YOU? SMOKING?<p>> Insider trading is almost impossible to prosecute and the government wastes countless dollars trying.<p>Um, actually, the SEC budget is definitely countable, and not infinite. It was 1.229 billion for 2011, and I'm pretty sure that wasn't all enforcement: <a href="http://www.wallstats.com/deathandtaxes/" rel="nofollow">http://www.wallstats.com/deathandtaxes/</a>