“The silent road to serfdom: why passive investing is worse than Marxism”

In 2016 researchers at Bernstein, a broker, published a note entitled “The silent road to serfdom: why passive investing is worse than Marxism”. 

A decade later the revolution is still in full swing. Trillions of dollars of capital have poured from actively managed investment funds into those that simply track market indices

No one is surprised that analysts who sell research to stockpickers dislike the passive funds that are outcompeting their clients.

None of this, however, means that passive investment really is harmless. Its detractors make a valid complaint: markets’ social function is to direct capital to where it will be used most effectively, and passive funds make no attempt to do this.

A much-discussed working paper—at least among active fund managers—makes a compelling case that the arbitrageurs have a far weaker effect than is commonly thought. If so, then flows of assets into passive funds really could be distorting share prices and helping to inflate a bubble.

The paper, by Xavier Gabaix of Harvard University and Ralph Koijen of the University of Chicago, sets out their “inelastic markets hypothesis”. 

It’s not quite Marxism—but not altogether reassuring, either.  

The Economist 14 January 2026

https://www.economist.com/finance-and-economics/2026/01/14/is-passive-investment-inflating-a-stockmarket-bubble


This is the dumbest stock market in history

https://englundmacro.blogspot.com/2025/10/this-is-dumbest-stock-market-in-history.html


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