The recent conviction of Martha Stewart for lying to federal investigators looking into “insider trading” is one of the sad signs of our times. If you create enough laws, everyone will be a criminal.
Perjury should of course be a crime, even when it is committed by a president of the United States. But insider trading is something else.
The big objection to insider trading is that it is not fair if one side in a stock trade has knowledge the other side does not. Some have analogized it to selling a car that is a “lemon” or a house with termites or other hidden defects.
There is one fundamental difference, however. Stocks are not sold with warranties, express or implied. They are always sold “as is.” Risk is the very reason stocks exist in the first place — and nobody is forced to buy them.
The very reason for stock sales, in many — if not most — cases, is that the buyer and the seller have very different assessments of the future value of that stock. Both know this, though neither may know on what information the other’s assessment is based.
It would certainly be a better world if everyone knew as much as everyone else and had an equal ability to analyze the information. But a moment’s sober reflection should show how virtually impossible that is in the real world. We are nowhere close to that in any aspect of human life, from the most frivolous games to the most serious life-and-death crises.
Differences in knowledge are among life’s many imperfections. If we are to pass criminal statutes addressing all imperfection, we may as well go straight to totalitarianism, without passing “GO” and without collecting $200.
Politicians are forever coming up with “solutions” to virtually every imaginable imperfection in the world. But, if we give them more power and more of our money, we are very unlikely to end up better off on net balance.
The history of 20th century despotism is a history of leaders claiming to solve their people’s problems for them — and then creating tragedies worse than any of the problems they were supposedly to solve.
Eternal vigilance is only part of the price of freedom. The maturity to live with imperfections is another crucial part of the price of freedom.
Human beings can be fair in having rules that apply to all alike. But life itself has never been fair, or anything close to it. Circumstances can be very different, even for people born to the same parents and raised under the same roof.
Criminalizing life’s unfairness is not the answer. Utopian dreams have led to despotic nightmares in too many places and times for us to repeat such old mistakes. On insider trading, caveat emptor is preferable to criminal statutes, at least for those who take the imperfections of the world as a given.
Another aspect: The political left has increasingly vented its hostility to business by creating criminal statutes for things not nearly as harmful as the career criminals whom liberals are so willing to excuse or let off with light or suspended sentences.
Liberals like to equate crime in the streets with “crime in the suites.” But nobody is unwilling to go outside their homes at night for fear Martha Stewart will sell them some stock. The left’s verbal parallels have little to do with life’s realities.
Recent decades have seen everything criminalized from foreign policy to farm practices that inconvenience some worm or toad. Donating money to political candidates has become so enmeshed in criminal laws that the advantage goes to those who can afford to pay lawyers to tell them how to avoid getting trapped — or even how to circumvent the law’s intent.
If your response to every wrong in the world is “there ought to be a law,” you are saying you hold freedom very cheap.
Thomas Sowell is a nationally syndicated columnist.
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