Insider Trading as a Type of Intellectual Property

In Types of Intellectual Property I noted the main types of IP (patent, copyright, etc.) and that other rights, like reputation rights (defamation law) should also be viewed as a type of IP. I was listening this morning to a recent Lew Rockwell podcast, 238. Lew Rockwell Attacked By a Parasite, in which Lew makes the point that insider trading law should not be a crime because it’s absurd for the state to penalize people from acting on information that they have.

I have often criticized patent and copyright on similar grounds. So should we also view insider trading as a type of IP? Here are some ruminations I sent to some friends about this.

Insider trading laws basically prevent you from acting on information you have acquired. Isn’t that the essence of IP? Though here it’s more a type of triangular intervention, in Rothbard’s typology. In patent and copyright, a private person is said to own information–the right to use information, and thus he has the right to use state court force to stop other private actors from acting on that information.

In trademark: the trademark owner can prevent a competitor from patterning his products a certain way–even if the customers are not defrauded (and if they were, they should have the right, not the trademark user). In trade secret, you can get a court injunction–force–against an innocent third party who has learned of secret information, to prevent him from revealing it (acting on it).

In the case of defamation law, reputation rights (libel and slander)–the person who “owns” the reputation–can use state force against others who communicate certain things about the person, to others.

All of them involve information control. Right?

Now in insider trading, the state itself can punish you for using or communicating certain information, or acting on certain information. There is not a private plaintiff who owns the information. So here, it’s the state itself that claims the effective ownership of inside information. (In fact the state engages in insidious insider trading all the time; collusion and cartels with other states; etc.).