For most of my life, much of what I’ve learned about the world came from watching movies. This was especially true in 1983, when I was in junior high. That was the year I learned about astronauts (The Right Stuff), thermonuclear war (War Games), and ewoks (Return of the Jedi). I also learned about financial crimes—specifically insider trading— from the Eddie Murphy/Dan Akroyd comedy, Trading Places.
If you’ve forgotten the plot, here’s a brief summary by Gary Gensler, the former Chairperson of the Commodity Futures Trading Commission. In testimony before Congress, Gensler said,
In the movie “Trading Places,” starring Eddie Murphy, the Duke brothers intended to profit from trades in frozen concentrated orange juice futures contracts using an illicitly obtained and not yet public Department of Agriculture orange crop report. Characters played by Eddie Murphy and Dan Aykroyd intercept the misappropriated report and trade on it to profit and ruin the Duke brothers. In real life, using such misappropriated government information actually is not illegal under our statute. To protect our markets, we have recommended what we call the “Eddie Murphy” rule to ban insider trading using nonpublic information misappropriated from a government source.
Turns out I wasn’t wasting my time on a silly comedy—I was learning about a future commodities regulation.
Yet aside from the “Eddie Murphy” rule, I don’t actually know that much about insider trading. I also hadn’t given it much thought since watching Gordon Gekko get rich off inside information in Wall Street (1987). But this week I listened to an intriguing Planet Money podcast about the topic. The show’s hosts, David Kestenbaum and Jacob Goldstein, ask a question that I hadn’t considered before: What makes insider trading wrong?