Again, one critique of passive investment has been that, by buying indiscriminately, it will lead to more misplacing in markets. That, according to this argument, would be good for active fund managers, who will find themselves in a target-rich environment, but perhaps bad for companies and the economy.
It may be that the reverse is true, as "dumb" small or unsuccessful active investors are pushed out and replaced by passive giants.
"The trend towards passive management is not only sustainable, but that it actually increases the accuracy of market prices. It does so by preferentially removing lower-skilled investors from the market fray, thus increasing the average skill level of those investors that remain," according to the post.
The net result is a more efficient market and economy, with less labor and treasure wasted on price discovery. That money which otherwise would have gone to line the pockets of active fund managers can then be deployed to more useful ends, upping productivity and output.
Philosophical Economics makes the argument that markets aren't a "marketplace of ideas" where good chases out bad, but simply a place where my stupid opinion has exactly the force of the dollars I put behind it and so does Warren Buffett's clever trade.
"All of the decisions impact the price, at all times. If the average skill that underlies the decisions goes down, then so too will the quality of the ultimate product - the price," according to the post.
Quality prices are not, of course, by necessity higher prices. They do, however, ultimately lead to quality allocations of assets, which must ultimately increase wealth.
So, we may owe thanks to passive investors, not for acting in their own best interests, but for contributing to ours.