> It's not necessarily a bad idea, but it's hardly a panacea with perfect incentives.

Sure, but I'd argue it's the best thing available to most retail investors.

What's the alternative? Asking my mom to day trade and pick stocks to fund her retirement? Or investing in actively managed funds that charge 1-2 % fees, yet don't really outperform the market over the long term?

Index funds make it easy to get your money in the market and diversify, while keeping costs super low.