[feynmanistheman]

Isn't the rise of index funds an example of rational choices in a free market leading to suboptimal outcomes?

You contend that the success of corporations maximizing shareholder value relies on active shareholder governance. Yet the rational choice for an individual in an efficient market is to simply diversify their portfolio and minimize fees through passive investments. How would a freer market fix the time frames issue that both of you agree is a problem and you suggest active long-term shareholder pressure is necessary to solve?

[pdonis]

> Isn't the rise of index funds an example of rational choices in a free market leading to suboptimal outcomes?

To the extent that it creates problems with time horizon and corporate governance, yes.

However, that does not mean that making the market less free will improve outcomes.

> How would a freer market fix the time frames issue

Who said anything about a "freer market"? You just said (and I agreed) that the rise of index funds is an example of rational choices in a free market. So there is no "freer" market that can fix it.

What I said was that government interference does not fix anything; it makes things worse. (US tax laws being an example.)