Europe and North America have reduced their emissions, but that has been more than offset by increases in other countries, and to a large extent, by moving high emission activities to those very countries. With their growing prosperity rooted in this these are exactly the countries that are unlikely to actually reduce emissions.

CO₂ emission are far more important than either offsetting or other greenhouse gas emissions. I have not always been all that concerned about climate change because (like most people) I thought of the primary effect as being temperature rises, which will have regional variations, have some benefits, have varied quite a lot (at a regional level, possibly at global) in the last few tens of thousands of years, and which both we can adapt to (and hopefully natural ecosystems too). I have recently been reading about ocean acidification, and I find that scary. It could wipe out or impoverish  whole ecosystems, globally.

A lot of the commitments have been to achieve “net zero”. This encourages greenwashing, because it leaves leaves room for doing things that make the numbers look better, but do not actually benefit the environment. You can plant some trees to offset emissions over their life, but what guarantee is there they will survive all political, economic and environmental change over decades? All the more so given many are monocultures so whole tracts could be wiped out by one disease.

Then look at some of the actual pledges. China and India have agreed to net-zero in 2060 and 2070 respectively. Nearly 40 years and nearly half a century. Will a commitment hold that long? Thinking about how much the world has changed in the last half century, I am very sceptical.

One of those changes has been that the influence of the west has dwindled, and it is in the west that there is the strongest political and popular support for limiting emissions. This will continue as Asian economies grow. In thirty years time this will all depend on Chinese and Indian politics – and China is a dictatorship that has never shown much sign of caring about the environment. India and other major growth economies have a lot to do.

Another problem, which is global, is that capitalism has a built-in bias to promoting economic activity over lack of activity, and the best thing for the environment is to do less: consume less, produce less, not do things. This encourages the sale of green products – so there is a strong incentive to do things like replacing energy infrastructure, but little incentive to preserve eco-systems by leaving them alone, so we both chop down forests, and then generate “carbon credits” by planting trees.

There are other issues with forests as well – e.g. claiming carb credits for forests no one had any intention of cutting down in the first place.  Offsetting has other problems – you can claim the offset for planting a tree when it is planted on the assumption that it will grow to maturity, but there is no guarantee that it will do so, or even that it is likely to do so. All this is encouraged by commitment to metrics that are easily cheated.

There are many other examples of things that are sold with a false promise of being “green”, or that people could do that are not done because there is no profit in it (and therefore no profit in promoting it).

I suspect some people will say that the cure for the bias in capitalism is more government control. The problem is that the biggest growth in CO₂ emissions has come from China, a country where business is controlled by the government.

Other state controlled economies do not have a great record either. The worst instance of climate change we have seen so far has been the death of the Aral Sea, which has not only turned most of what was once the world’s fourth largest inland body of water into near desert, destroying its rich ecosystem, and the economies it support, but also devastated the climate of a huge region around it. It will be extremely hard to reverse because one of the effects has been reduced rainfall feeding it. Who caused this devastation? The centrally planned Soviet Union.

Some will argue that the increase in CO₂ emissions and other pollutants by countries like China is still the fault of the rich countries, because that is where they export to, and they manufacture to export. This is true to an extent, but is far from being the whole truth. Chinese exports are about 18% of its GDP, and it exports to virtually every country: India imports more from China than the UK does.

There is also a lack of willingness to do anything about this. For example, carbon border taxes (i.e. import duties based on the emissions used to produce imported goods) have been discussed for a long time, particularly by the EU. So far, the only progress has been a (not yet implemented agreement) to require the trading of emissions trading certificates for a small number of goods from 2026. Of course, emissions trading certificates will just lead back to the same problem of greenwashing.

There are also ways around this, and it could even make the problem worse. The current proposals will only tax input products like steel and hydrogen. This will encourage the import of finished products instead. Back to step one.

There are many things people can do that will make a difference, but these are not pushed – there is no incentive to. For example urban plants, including gardens, are a significant carbon sink. It is relatively easy to make them far more effective a carbon sink and very good for wildlife. Less effort than maintaining a conventional lawn. Very few are willing to do this. In fact, the general trend in the UK has been to make things worse by replacing gardens with tarmac and decking in order to reduce maintenance.

Many people are willing to buy a new electric car (a dubious improvement given the environmental impact of manufacturing), but very few are willing to change their shopping habits or “neglect” their garden.

All the net-zero targets in the world maybe achieved, but they will not change anything. It is interesting that Greta Thurnberg has been in the news far less since she called out the greenwashing of COP27. As with many things, the metrics have now become more important than the reality. I told you so.

I have a diesel car. We do low annual mileage and much of our driving is through open country,  so I am pretty sure the environmental costs of scrapping it and replacing it with a new vehicle would massively outweigh any gains from running a cleaner car. I suspect that eventually the government will encourage people to scrap regardless of this: because it helps meet the numbers.

The British government defended the policy on the grounds that “it was not known” at the time that diesel was bad? The EU did not know about diesel particulates? Really?

The EU still requires that diesel contains a proportion of bio-diesel. This, again, meets the treaty targets because it is a renewable. The fact that we are chopping down forests to achieve this. In case it is not obvious this policy is that the forests that  remove CO₂ from the atmosphere are being cut down, and we are causing localised climate and other environmental damage, and  we are worsening the already terrible mass extinction.

The British governments subsidises the Drax power plant in Yorkshire because it uses “renewable” wood instead of dirty coal. This, once again, means chopping down priceless forests and increasing CO₂ emissions and using the only fuel that is actually dirty than coal. Once again, the underlying problem is that the metric is out of touch with reality, and the metric is what matters because it has become a treaty obligation.

There are two political problems:

1. The need to have fixed targets, which requires a metric, and a metric will never reflect the reality of as complex a problem as this.
2. The influence on government policy of vested interests such a businesses that have products to sell to solve the problem.

The latter problem is worth expanding on, Have you ever wondered why there is so much focus or reducing the use of fossil fuels, and so little on preserving the forests that are vital to removing CO₂ from the atmosphere? The answer is simple. There is money to be made in selling new power plants, new cars, and all the rest. A lot of money. There is no money to be made in not doing something. Guess which the world’s invariably “business friendly” governments prefer?

Globalisation is to blame for two reasons. Firstly it encourages centralisation. Secondly it encourages imports which makes it harder for anyone to anticipate or plan for the problem and cuts domestic production even further. It makes central planning (which does not have a great track record) even harder.

The reason we have this system is supposedly the pursuit of efficiency, and it is possible that prices of ammonia (of which CO₂ is a by-product) and CO₂ are lower as a result. I have some doubts (there are other motives for scaling up, and there is plenty of evidence that agency conflicts and the advantage to managers is the real motive), but we can leave that aside for now.

A clearer problem is that the costs of the shortage are widely spread out across the economy, rather than falling on those who operate the plants. In other words, the risk and reality of shortages are externalities.

Combine externalities with the market fundamentalist ideology of the “invisible hand” and the, again ideological, taking of homo economicus not just a useful simplification in economic models but as a guide to reasonable, even moral, behaviour, and we have all the ingredients for the problem. It is not the manufacturers duty to even warn of the problem, let alone try to ameliorate it. If people are expected to have a selfish motivation, what duty is expected to customers, let alone wider society?

So, in summary, if we had lots of small firms, instead of a few big ones, we would avoid this sort of problem. If we had a bit less free trade, it would help as well. Finally, if we had different ideologies and attitudes, we could plan for it. However, these are not three separate issues: they are all products of the market fundamentalist/neo-liberal/pro-business (call it what you will) ideology.

Consistently favoured corporate interests over public interests

The EU is far more insulated from public pressure than national governments but even more prone to listening to corporate lobbyists. It is not transparent enough about lobbying for us to even know what the real expenditure is, but we know it a lot.
The greatest single case of this is in the supposedly free trade, but really corporate welfare, TTIP treaty which the EU is pushing hard, despite widespread public opposition. Who wants the treaty? Corporate lobbyists. It also binds countries permanently to particular policies, undermining democracy.

Made the financial crisis a lot worse, and that is just the start

The Euro ties many, very diverse economies, into a single interest rate. Without full political union (e.g. the EU cannot directly raise tax, and there are limits on its spending power) means the EU cannot quickly take money away from countries where Euro rates are too low and give it to countries where rates are too high. This weakness is what lead to the crisis in countries like Greece.

Most single currency areas are countries, and that redistribution happens and it largely happens automatically (regions that are doing well pay more tax, regions that are doing badly get more welfare). The EU has a currency union without the political union that is needed to make it work.

The UK was lucky to be outside the Euro, which reduced the damage – but it still suffered some indirect damage. It also faces the prospect of this happening again and again, and on top of that EU policy will increasingly be set by the needs of the Euro area – so the UK can stay out of the Euro and have unsuitable policies, or join and get the full blow of each crisis. A great choice.

Helped crooked politicians and paedophiles keep their past secret

The EU’s right to be forgotten (part of EU law, not human rights under the entirely separate European Convention) has allowed people with unsavoury pasts to remove references to their offences on the web. In the case of the politician this undermines democracy (because information about how a candidate behaved in office is hidden from voters) and in all cases in undermines free speech.

What is even better is that people outside the EU can find this information.

Imposed stupid and harmful regulation

Those in favour of the EU point to tabloid examples of bad regulation that turn out to false. However, the fact is that the EU does create a lot of harmful, and down right stupid, regulation. Two that I have dealt with is the cookie law and VATMOSS.

The cookie law was supposed to protect privacy. With a very few exceptions, the best it ever achieves is that sites pop up notices that tell you that if you continue using the site you agree to their cookie policy.

The only way sites can track whether or not you have agreed is to set a cookie, so anyone who turns cookies off, or only allows selected sites to set cookies, gets bombarded with notices on every page or every EU based site. This is deterrent to protecting your privacy with things like Cookie Whitelist. I have also notices a sharp increase in the sites I use that will not work without cookies since the cookie law was passed.

It has also encouraged tracking without cookies, by using browser fingerprinting, which is much harder to protect against.

VATMOSS is even worse. It is more expensive to comply with, particularly for small businesses that are below the VAT in their home countries, who now have to register for VAT if they make a single sale (of affected products) to another EU country. Some small business have stopped selling digital products to other EU countries, others have closed or faced huge costs. Here is the story of a company that relocated from the UK to Singapore as a result.

In short, the EU’s regulations seem to achieve the opposite of the stated purpose of the EU. It undermines trade, and complete fails to understand small business or technology.

Made books, and a lot of other things, more expensive and less easily available

The EU requires a minimum copyright duration of life + 70 years. This is great news if you are a publisher, or a successful author’s or painter’s grandchild who wants a pension boost. For the rest of us, it makes books and other works, more expensive, and it also means that anything that remains in extended copyright that it is not commercially attractive to publish (e.g. will sell in large numbers) will simply be unavailable, as free ebook distributors will be unable to give away copies.

The EU’s excuse for this was that it would harmonise copyright laws, so we could freely trade copyright works across the EU without worrying about legal differences. The odd thing is that it did not make life + 70 a fixed copyright duration, but a minimum, so countries like the UK and France can have extended copyright on some works, so the law is not actually harmonised.

I will not discuss the ludicrousness of a duration that means works created while Queen Victoria was on the throne remain in copyright in the 21st century (for example, many of Shaw’s works were written then, and remain in copyright until 2020).

Caused floods

The EUs counter arguments are that recent changes (“greening” measures) to the regulation mean that this is either no longer true, or less true, or and harm is now down to how national governments implement things. However all these relate to changes in the last few years, ignoring the damage done over many decades.

Here is the original, but its all quoted below.

I write this to explain why I’ll be holding back my album, 1989, from the new streaming service, Apple Music. I feel this deserves an explanation because Apple has been and will continue to be one of my best partners in selling music and creating ways for me to connect with my fans.

I make lots of money from iTunes, and this could be profitable too, so I had better do enough grovelling first to let me change my mind if I have to.

I respect the company and the truly ingenious minds that have created a legacy based on innovation and pushing the right boundaries.

They are really good at marketing, just like me.

I’m sure you are aware that Apple Music will be offering a free 3 month trial to anyone who signs up for the service. I’m not sure you know that Apple Music will not be paying writers, producers, or artists for those three months.

It is shocking that anything new in the music industry does not make even more money out of fans.

I find it to be shocking, disappointing, and completely unlike this historically progressive and generous company.

Apple is really good at extracting money from consumers, so we want a slice.

This is not about me. Thankfully I am on my fifth album and can support myself, my band, crew, and entire management team by playing live shows.

This is entirely about me, but people are horribly unsympathetic when a super-rich 25 year old complains she is not making enough money.

This is about the new artist or band that has just released their first single and will not be paid for its success. This is about the young songwriter who just got his or her first cut and thought that the royalties from that would get them out of debt.

That is assuming that lots of people listen to them on Apple Music, and no one buys downloads or CDs or anything, and assuming unknowns people actually make lots of money from their first single. Its not like this is an industry where a few stars make all the money of something!

This is about the producer who works tirelessly to innovate and create,

A lot of my rich and successful friends and colleagues will not make enough money out of this either.

just like the innovators and creators at Apple are pioneering in their field…but will not get paid for a quarter of a year’s worth of plays on his or her songs.

I think a bit more sucking up here will make me sound better.

These are not the complaints of a spoiled, petulant child. These are the echoed sentiments of every artist, writer and producer in my social circles who are afraid to speak up publicly because we admire and respect Apple so much

These are the complaints of a spoiled, petulant bunch of rich people who want more money, but are scared of upsetting Apple too much.

We simply do not respect this particular call.

We will respect a call that makes us more money.

I realize that Apple is working towards a goal of paid streaming. I think that is beautiful progress.

It would be really great if people paid to listen to streaming services, and then paid again to buy downloads. No physical product, gross margin of almost 100%. That is what I call beautiful.

We know how astronomically successful Apple has been and we know that this incredible company has the money to pay artists, writers and producers for the 3 month trial period… even if it is free for the fans trying it out.

Apple needs this to work badly enough that my friends and I can squeeze some money out of them, even if they are not making any money out of it.

Three months is a long time to go unpaid, and it is unfair to ask anyone to work for nothing.

I want the money now.

I say this with love, reverence, and admiration for everything else Apple has done. I hope that soon I can join them in the progression towards a streaming model that seems fair to those who create this music. I think this could be the platform that gets it right.

Pay me from the start, then I’ll be happy.

But I say to Apple with all due respect, it’s not too late to change this policy and change the minds of those in the music industry who will be deeply and gravely affected by this.

We can squeeze pretty hard if we want to.

We don’t ask you for free iPhones. Please don’t ask us to provide you with our music for no compensation.

…because the cost of producing an iPhone is near zero just like the cost of producing a copy of music. I may use free software to run my website, but I need more money than a geek! Its not like anyone ever produced art or music without being assured of royalties first.

Immediate problems for consumers

The root problem is the denial of consumer choice. I am writing on a laptop, which, being PC hardware, is extremely flexible. On it, I can install any version of Microsoft Windows I have install media for, any one of a number of Linux distributions (from fully fledged ones like Ubuntu, to Google’s cut-down Chromium/Chrome OS), Android, FreeBSD and its relatives, and a number of lesser known operating systems. I can also do the same with an Apple Mac (Macs are just PCs made by Apple). I cannot do this with tablets and smart phones.

The most immediate problem is the security problems this causes. Many Android devices cannot be upgraded, because users are dependent on the device vendor for updates, so security issues are not fixed. Any Android device quickly becomes highly vulnerable to viruses and hackers.

Apple is much better in this respect, but is deeply anti-consumer in its strategy of customer control and lock-in. Software must be bought through Apple’s App Store, and software that competes with Apple is banned. Apple takes a large  cut on the price books music and films bough through any app (or the app is banned). hardware works only with Apple devices (Android devices often work with PC hardware, from mice to mobile wireless dongles) to raise the price of switching to a competitor, media bought from Apple will only run on Apple devices (or, currently, on PCs with Apple software).

The long term threat to innovation

The leading tablet and phones operating systems are Android and Apple’s mobile version of MacOS. Android is based on Linux, and MacOS on a combination of FreeBSD and Mach. Linux, FreeBSD and Mach are open source operating systems that exist because PCs provided a cheap hardware platform that they could run on, giving them a much larger users base than would have been possible on specialist hardware and greatly bringing down the cost of development.

There also have been, and are, many experimental, research, and early stage operating systems that benefit from running on cheap hardware. These may come to obvious prominence by becoming widely adopted, or they may provide a a base to develop variants, or they may just pioneer ideas that later become more widely adopted.

Tablets could have made a great, cheap research platform. They could have provided scope for children to experiment with cheap devices and become the next generation of innovative software developers — as the Raspberry Pi allows but with a far more widely available mobile platform. Start-up companies could have modified and reprogrammed tablets to create completely new devices without needing the huge amounts of capital to create a custom device from scratch.  Learning, experimentation, and innovation are being pushed onto specialist hardware, and will therefore become less affordable.

The greatest danger is that PCs will become more like tablets. Microsoft has taken the first step towards this be requiring that all PCs that can run Window 8 supprt “secure boot” — i.e. they will only run operating systems that the manufacturer permits. At the moment, secure boot can be turned off — but for how long? If PCs become as closed as tablets, then what cheap platform will innovators have to work on? What platform will consumers have that disruptive innovation can run on?

So what is the real purpose? It varies, but the key in most cases is to control consumers. Consider the the Amazon Kindle and the DRM Amazon applies to books. Again, the content is available without DRM through the Kindle Cloud Reader: although, as far as I have been able to find out it is in any case fairly simple to remove the DRM from Kindle ebooks, so no one bothers the more awkward process of intercepting the DRM free content in Cloud Reader.

The real purpose of Kindle DRM is to make it expensive to switch to to another device. A consumer who has a collection of books and wants to switch to another ebook reader must purchase new copies of every single book they want to keep. This ties consumers down, maintaining market share against existing competitors and making it very difficult for a new entrant into the market to gain share at all. The tech savvy minority will strip the DRM, but for the majority of customers switching will simply not be an option.

Of course many services have exceptions to DRM: much of the music Apple sells is now DRM free, and Amazon Kindle software can be used to read Kindle books on an Android tablet (and the Cloud Reader to read on any platform), but the remainder is still a very high barrier to switching. Furthermore, none of these are guaranteed to remain available: they may turn out to be a  way of leading customers into lock-in, and may be withdrawn once their purpose has been sufficiently served. In Apples case its customers are locked in in multiple ways, not just DRM, so selling some content without DRM does not loosen the lock very much.

The bottom line is that DRM is a way of limiting competition; a way of routing around free market competition.

What I suggest is a charge in the low to mid thousands of pounds for an annual visa, to high tens of thousands to low hundreds of thousands for a lifetime one: I am not sure how much of a premium the security of the latter is worth.

Consider the impact. A million people (i.e. a less than 2% increase in the population) paying £5,000 a year would be enough to pay the cost of servicing the national debt, making the deficit effectively free. Furthermore anyone who found it worth paying that much would have to have an income high enough to pay a substantial amount in tax as well (of course that would need to be netted off against costs, but it would be strongly positive).

There would be some costs, and these would have to be minimised by filtering out some people. I would suggest those with criminal records, criminal connections, and not in good health. Excluding the former would be a significant tightening compared to current visa requirements which, in practice, often welcome rich crooks and criminals.

Alternatively a million people who pay a £100,000 each would pay enough to pay off large chunk of the national debt and would pay even more in tax.

Then consider the economic stimulus that would result. The extra government spending and the extra money being spent by all those extra people would inject a huge amount of money into the economy.

It would also drastically reduce illegal immigration: it is definitely preferable to pay the government and enter legally, free to take any job, than to enter illegally, with no guarantee of success, and no security once in, than to risk paying smugglers.

Many people will claim that there is not enough room, or not enough housing. I have addressed these points before in my posts on the UK’s population density and on planning laws.

In the long run, the growth that matters is economic growth. Without economic growth organic growth would be a zero-sum game, and negligible at the market level. There would be winners and losers, but the gains would be entirely offset by the losses, so the average investor would gain nothing from this growth.

The question is what drives economic growth? In the long term economic growth comes from improvements in technology. The economy cannot grow past the productive capacity of the economy, and technology enables this. This has not always been what we regard as high technology: the invention  of the horse collar had a tremendous impact on economic growth.

One thing investors forget is that technology often has an impact well beyond the the industry it occurs in. The agricultural revolution made available the pool of labour that enabled in the industrial revolution (not that it would have looked like a good thing to those in the pool!). Computers have allowed the automation of banking (manual processing of cheques is a lot of work) and made logistics more efficient (for example, fewer empty lorries because computers can match loads to journeys better than is practical manually).

I have been arguing for sometime that the last few decades have seen little new invention. I have recently noticed that the message seems to be getting through to the mainstream media (a recent article in The Economist, for example).

We have had economic growth driven by incremental improvements to existing technology. Computers may have ultimately similar designs to those available in 1970, and made using similar processes, but they would not have had the same economic impact if they were still the same size and cost!

The problem with this is that there are limits to incremental improvements. Once we reach the limits of, for example, reducing the size of integrated circuits (that the limits exist is a matter of the laws of physics), advances in computers and electronics will no longer be rapid.

There are also diminishing returns to incremental improvements. It is fairly clear that most of the productivity gains enabled by the automation of clerical work and financial transactions have already occurred, and the impact on productivity of making computers still smaller and cheaper will not be as big.

In the past by the time the impact of the big breakthroughs of one period were running down, the next lot of big breakthroughs were beginning to have an impact. With no big breakthroughs in the last 40 years, once the incremental improvements run out, growth is done.

Of course there are many exceptions to this. The largest lies in emerging markets where existing technology is not anything like fully utilised. The problem is that this is not a replacement growth driver, it is just one driver that is not disappearing with the slowdown in innovation.

Population growth may also help boost demand, at least in some countries, but it will also put pressure on limited resources, particular food and natural resources: slowing technology means that our ability to make more from the same inputs will not grow at the same pace as in the past.

There will also be some growth industries: I am not arguing that all advance will stop, just that it will be a lot slower. There will also be opportunities to consolidate and create economies of scale, and these may be easier to exploit when a lack of disruptive technology makes things more predictable.

None of this is enough to change things very much. Growth in one business will matched by a corresponding decline in another, as low economic growth means aggregate demand will grow slowly. If growth is lower, then returns need to be more immediate. The market as a whole should return far more in the short term: dividend yields need to be much higher than has been typical in the past. IN practice we also need to take into account other ways of returning profits to shareholders such as buybacks.

Although this may seem to be a triumph for value investing, I am not sure this is entirely true. Even growth that comes from wining a zero-sum game is growth nonetheless, and growth stock picking will continue: perhaps with gradual shifts in emphasis.

I am not a believer in strong form market efficiency. Neither am I a free market fundamentalist who believes nothing should be regulated. Insider trading allows insiders to profit at the expense of other investors, destroys faith in markets, and is fundamentally unfair.

Insider trading laws have been failure. While there is occasionally a successful high profile prosecution in the US, they are rare. I cannot even remember the last big case before Rajaratnam. Successful prosecutions are even rarer in the rest of the world, and very few big fish have ever been convicted in the UK.

Insider trading remains pervasive. Every study shows consistent patterns of price movements prior to news releases: proving that insider trading happens. The fact of further price movements after news is released disproves strong form efficiency: the price clearly did not reflect the undisclosed information until it was disclosed.

At the moment insider trading is not supposed to happen, but it does. The pretence that it does not gives investors false confidence. It is better to have no faith, than false faith, so I say destroy investors faith in the markets: it is better to tell the truth. The law is hard to enforce (because of the paucity of evidence) even when it is broken, and the difficulty

What would the consequences be? I must admit that in the past my opinion was that they would be disastrous: markets would seize up leaving most investors with very few options for saving. Companies would not be able to raise money for expansion from the markets. The economy would be owned by plutocrats due to the inability of small companies to expand, and the inability of the public to invest though the markets with confidence.

I changed my mind because a range of other possibilities occurred to me. Looking at possible scenarios, the end result is likely to be better than the sham we now have.

The worst case scenario is that investors will discount valuations for the risk that there is price sensitive information that has not been disclosed. This happens in poorly regulated emerging markets. In those countries lack of faith in markets due to insider trading does often inhibit the development of capital markets, and does hold back economies through all the consequences I used to fear. In a developed market where shares (and other securities) are widely held, and most money is managed by investment professionals, I think the different path will be followed.

The most likely to withdraw completely are are individual investors. What I expect is that fund managers will take great care they have to ensure that they do have all the information before investing: financial markets will work rather more like private equity does, with extensive due diligence. Individual investors will invest through fund managers, as that would be the best alternative left to small investors who ruled out running their own investments. This would make markets a lot less liquid, but far from ineffective at fulfilling their primary purposes in the economy, of allowing companies to raise capital, and individuals to get better returns.

The best case scenario is that markets would be forced to respond by raising standards. The better a company was at disclosing publicly what insiders know anyway, the less its securities would be discounted for the risk. This would create an incentive for transparency. Once a reputation for honesty with investors becomes important it would create a culture that values honesty, whereas tight regulation tends to create a culture that rewards the ability to push restrictions and find loopholes.

There are precedents for a culture of integrity and enlightened self interest making financial institutions work without the threat of punishments. Trading on the London Stock Exchange once relied on floor brokers keeping their word, which is why it adopted the motto “dictum meum pactum” (my word is my bond). The great mistake of modern law and regulation (and incentive schemes), and not just in financial markets, is to rely purely to selfish incentives, and ignore the far greater importance of prevalent values and attitudes.

Once obvious response to all this, is to suggest that the law be enforced more vigorously, or strengthened and enforced more rigorously. I do not believe that this possible. It is difficult to define inside information, and there are too many sources of extra information that lie outside the definition (information from sales channels, information that is not directly price sensitive, etc.) but can be significant: especially in aggregate, or because of inferences that can be made from it. It is too hard to prove what people knew and when and why they made decisions. If a CEO said that a lunch with a big investor was purely private and all they discussed were their kids and hobbies, how to you prove otherwise?

There is also a real lack of will in committing resources to going after lots of rich and influential people (the more money people have or control, the more damage their insider dealing does) committing a non-violent crime with very little likelihood of leaving enough evidence to be convicted.

The most practical solution is to give up on prohibition, and hope something better will evolve.