In the ideal case, the answer to your second questions seem to be obviously "yes"; the market in active managers will hit an equilibrium where their salary is p

In the ideal case, the answer to your second questions seem to be obviously "yes"; the market in active managers will hit an equilibrium where their salary is paid by the additional info they bring. However, it seems clear from the current situation that the market is far from ideal since there have been too many active managers for decades. Whatever it is that allows them to persist (human overconfidence, salesmen, principal-agent problems) has not been eliminated, even if "word has gotten out" so that investors have began to develop a partial immunity against them. Knowing exactly where the new equilibrium will be requires a detailed understanding of that mechanism, which I don't think anyone has.