The Efficient Markets Hypothesis: Act As If It's True
DeLong also links to an excellent piece by Justin Fox. Bottom line: The Efficient Markets Hypothesis has its problems, but even so, low-cost index funds remain your best bet:
The message that the behavioral finance guys have for investors is that yes, you can beat the market, but–for reasons that are essential to the whole behavioralist case–you almost certainly won’t. As a result, they end up offering much of the same investment advice that the efficient markets folks do.