Whether "smart beta" products are a good idea or not is purely an empirical question: specifically, whether the strength and persistence of the factors do in fact result in outperformance net of investment costs. The question can't be answered on a rhetorical basis.
As Jacobs and Levy point out, "The simplicity and transparency of smart beta strategies ... can result in lower management costs." Well, if they fail to result in lower management costs, then they're not very smart, are they?
It's obviously possible for a manager to out-smart a "smart beta" strategy, but that's not the relevant question. The relevant question is whether the manager can be expected to out-perform the "smart beta" strategy, ex ante, at any given time, net of all investment costs.
Competition should tend to weed out the poorly-performing "smart beta" strategies--the ones that Jacobs and Levy set up as straw men--just as it should also tend to weed out the poorly-performing "actively managed" strategies.
Incidentally, another interesting recent academic paper about the multidimensionality of stock market returns is "Aggregation of Information About the Cross Section of Stock Returns: A Latent Variable Approach" by Light, Maslov & Rytchkov, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2307563.