Matt Levine’s Money Stuff: Maybe Good Governance Is Bad

Should index funds be illegal?

You know the theory: When the same big diversified institutional investors own all of the companies, those companies have less incentive to compete with each other. If Airline A and Airline B have the same shareholders, and Airline A cuts prices to win more market share, that simply hurts the shareholders: Overall, the airlines sell the same number of tickets but at lower prices.

We talk about this theory a lot. It is controversial, in part because of disputes about the empirical evidence but mostly, I think, because it doesn’t feel right. That ...