Why the government shouldn't push index funds     Text Size  
Published: Thursday, 24 Oct 2013 | 11:25 AM ET By: | Senior
Editor, CNBC.com Getty Images A trader signals an offer in the
Standard & Poor's 500 stock index options pit at the Chicago
Board Options Exchange (CBOE).  Matt Ygelsias at Slate's
MoneyBox argues that the "clear implication" of the efficient
market hypothesis is that there is a "strong case for
paternalistic regulation" in financial services.  Ygelsias
doesn't go into detail about what the paternalistic regulation
would be or how it would work. But I get the sense that he is
trying to make the case that regulation should nudge investors
into low-cost, diversified index funds.  The logic here is
pretty straight-forward. The efficient markets hypothesis holds
that market prices accurately reflect all available information.
One implication of this is that it's extremely unlikely that
investors can beat the market by picking stocks.  In fact,
picking stocks or hiring professional money manage