It depends who is doing it. American politicians, both Republicans and Democrats, engage in it and it isn't defined as insider trading directly (it's grey). Pelosi's husband, Crowdstrike shares is one recent example.

I believe there was a law passed regarding this, and people are still repeating that politicians are exempt since before it existed.

I'm not saying there's no loophole, but I'm pretty sure there is now a law.

Probably the majority of tips do not yield much profit. The problem takes cares of itself in that as the information becomes more public, the market adjusts accordingly.

I don’t think that people are concerned about the trades but rather the perverse incentives it creates in the long term. Incentivizes bribes for officials on classified committees, it encourages employees to be more active in trading versus actually helping the company, investing would be pointless as the price would be set by insiders. By definition, any trade against an insider would be bad. It’s tough to predict the effects on the economy but I think it’s reasonable to say these behaviors are suboptimal for an economy. It’s a valid question because even Nobel laureates in economics have advocated for removing insider trader laws. However, my opinion is that academics are short sighted by their assumptions of the world. Namely, they assume that the agents would still try to maximize the well being of the company. No model is sufficiently sophisticated to take into account what happens when people get on their brokers instead of dealing with issues as they arise. As an extreme example, after noticing your data center is in fire, you clear your stock position before calling 911.

There’s a couple of key components to insider trading. First, you must be an insider. That is, loosely, anyone who has a some duty of trust. This can include public officials who are supposed to be serving the public and deciding to profit in times of crises instead of doing their job. This was not always the case. Furthermore, there is some notion of gaining information via illicit means also makes you an insider. The other is trading on material non-public information. “Valuable information” is only half the equation. For this, I’m going to use Matt Levine’s (I think that’s where I got it) example of how grey it can get. If a CEO harasses you, you are perfectly free to take out a massive short before suing the company. If the CEO harasses an employee, depending on the seniority and location of the crime, it could and could not be considered insider trading. Anyway, this is why we have the courts.