When I worked at a publicly traded company I was considered an insider because I was in 'senior management.' We would always know what our earnings announcement was going to be about a week or so in advance of the news release. Because of that we also knew how the earnings release would be received by the market and what the immediate impact on our stock price would likely be. I believe it would have been unfair for any of us "insiders" to have been allowed to trade on that information just because we worked at the company.

For example, one particular quarter we knew we were going to have a loss for the quarter when the analysts' consensus was for a small profit. No doubt our stock price was going to take a hit. I could have shorted our stock and made a killing. I can appreciate how the insider trading regulations protect investors who are not privy to such information.

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Does it hurt the economy?

I believe it would hurt our stock market if the public thought insiders could make trades based on their insider information. This can be empirically proven by looking at foreign stock exchanges which do not enforce insider trading regulations. The public basically will have nothing to do with investing in the stock market in those countries. All investing is by institutional investors and the even their investment amounts are very small. It effectively prevents a liquid stock market from developing.

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It is morally wrong?

Yes. It would be like selling a defective product, knowing it is defective and not telling the buyer about the defect. I suppose someone could argue caveat emptor, but if that attitude was prevalent in the stock market, I personally believe the damage to the equity capital markets would be enormous.

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Does it hurt anything else?

I'm not sure what "anything else" includes. I believe it would discourage private investment into publicly traded companies. As soon as investors started thinking they were at a distinct information disadvantage they would never want to buy a stock again, IMO.