I believe the standard economic argument to allow insider trading is that it would encourage much quicker uncovering of and dissemination of good and bad news.

I believe the standard economic argument to allow insider trading is that it would encourage much quicker uncovering of and dissemination of good and bad news. E.g. if people inside Enron had traded on inside info that Enron had cooked the books than it likely would have kept the brakes on the stock price. Instead you have regs that jail insiders (usually people lower down on the totem pole as the higher ups benefit from the coverup) for leaking correct information and preventing a correct (lower) price.