Nobel Prize winning economist Gary Becker supports private accounts for Social Security, and says account owners should only be allowed to invest in index funds:
"We should follow the President’s proposal, and only allow index funds for social security accounts- that is, funds that do not try to beat the market and invest in a balanced market portfolio of stocks and bonds."
But the Calico Cat, who does not have any Nobel Prizes, writes that too much index fund investing will endanger the stability of the markets:
What would happen if everybody decided that they only wanted to invest in index funds because this was the safest way to invest? The result would be very bad, because there would be nothing determining the prices of stocks within the index. ... It becomes apparent that index funds only work when a minority of investors are using them as their primary investment vehicle. I don’t think we could have stable markets if the majority of money were invested through index funds.