The question isn't active vs passive. Price discovery is an essential function in capitalism, so we will always need active managers. The question is, how much active management do we need for effective price discovery? The truth is, the Grossman-Stiglitz paradox is irrelevant. Active managers don't have to rely on arbitrage opportunities as compensation for their active efforts. If that were true, most would be out of business. Instead, they charge their fees whether they beat the market or not. They take advantage of the fact that everyone wants to beat the market, and they are really good at selling products claiming to do just that. The losers in the equation are the end investors. The winners are the asset gatherers charging high management fees for something they are unlikely to deliver.