(FORTUNE Magazine) – We've been reading quite a bit about Mean Dennis Levine of Drexel Burnham Lambert, or at least that is where he hung his hat until recently, and we arguably now know even more about Dennis than about the editor in the adjacent office. For example, we have virtually no input on Ed Faltermayer's adolescent phase, whereas it is lengthily explained in the Washington Post that Levine used to hang out with a very rough bunch (he had a ''Fonzie sort of streak'') when he was in junior high and was predictably labeled Dennis the Menace. At Bayside High School in Queens, we have also now been advised, Dennis engaged in virtually no extracurricular activities, so that he was forced to list nonstarters like ''hall patrol'' in the senior yearbook. Somehow we cannot imagine Ed on hall patrol, but then people do change. Not all the details about the suddenly famous Drexelite have been so personal. Many concern his alleged insider trading, which maybe violated the Securities Exchange Act of 1934 and definitely went against certain spiritual values held high by the media's judgment-formation brigades. Right on cue, these again came out against excessive cupidity in the stock market. To be ; sure, not every press pundit was up to discovering ''Greed on Wall Street,'' the instantly immortal headline atop Newsweek's cover story. And yet something is missing. In all the landslide of commentary on Dennis's avaricious angles, we still cannot find the furtive fact that would justify the cosmic significance attached to the case by SEC bloodhounds. Question: How was the investing public hurt? It is the SEC's job to protect the investing public, and there are moments in the commission's briefs where it seems almost ready to answer the above question. In the May 11 brief, for example, there is a passage about Dennis's scheme, presumably successful, ''to defraud investors on the U.S. securities markets of millions of dollars over the next five years.'' But the answer does not forthcome. In more than 60 pages of accusatory court petitions, featuring cliches (''ill-gotten gains'') that Judith Krantz would disdain, the SEC folks nowhere get down to cases and tell you how the public was hurt.

So here we go again trying to explain Henry G. Manne's utterly logical analysis of insider trading: It does not hurt investors on average. On balance, it probably helps them. (Manne, now dean of the law school at George Mason University, originally made the case in a 1966 book called Insider Trading and the Stock Market.) Look. Dennis Levine's alleged trades affected other investors only to the extent that they raised or lowered prices. Obviously, then, those other investors did marginally better or worse, depending on whether they were buyers or sellers. The trading that allegedly defrauded investors of millions was in fact ''revenue neutral'' for investors as a group. Furthermore, insider trading makes markets more efficient. When insider trading is prevalent, prices are more likely to reflect reality, meaning that uninformed outsiders can assume the prices they're getting are ''fair.'' If, counterfactually, people with material inside information never traded, but instead sat on their hands like good little boys, then outsiders would always be running a risk of getting blind-sided by huge price swings after the announcement came out. We happen to know a few outsiders who would be mad if that happened to them. Some of them are quite greedy, you know.