Stock pickers have gone fishing

Utpal Bhattacharya and Neal Galpin at Indiana Univerity find a genius way to measure how many traders are still actively attempting to beat the market (although they rarely manage to). They find that two third of them have retreated to passive investing since 1960s. Their equilibrium model also suggests that, for the remaining who are still picking stocks, it is in the interest of our society to send half them to do some fishing in Tahiti. The paper also is featured in New York Times and the Economist

Is Stock Picking Declining Around the World? 
Abstract:      
We do three things in this paper. We first develop a metric to measure the maximum fraction of volume explained by stock picking in a market. We then use our metric to measure stock picking around the world. We find that though there is more stock picking in emerging markets than in developed countries, it is declining everywhere. In the United States, for example, stock picking has secularly declined from a high of 60% in the 1960s to a low of 24% in the 2000s. Finally, as markets cannot be efficient if everyone believes that they are efficient and, therefore, do no stock picking - the Grossman and Stiglitz (1980) paradox - we ask what is the long-run steady state fraction of stock pickers? We develop a simple theoretical model, and calibrate this model to the United States economy to conclude that stock picking will eventually settle at 11% of trading volume in the United States.