Market makers and HFT don't determine price: price is usually purely determined by the net inflows and outflows as decided by humans. MMs just smooth it out over time so everyone gets good pricing at the time and in the size they want it.
> Second, there is never any reconciliation of the costs society is saddled with in order to chase arbitrarily more accurate prices
By definition market makers are earning a fraction of the price improvement they provide, ergo the costs to society have to be less that the benefits for better pricing for the companies to stay in business!
> Third, as an index investor, I more or less couldn’t care less
As an index investor you should absolutely care! How do you think you are able to buy into the fund at a reasonable price? And then how do you think the fund is able to rebalance without transaction costs destroying performance long-term?
"as decided by humans", more than 90% of trades are led by bots, so no, price is not being determined by humans.
In fact, we have seen time and again how some weird companies get a huge inflow of purchases simply because of bots misinterpreting news articles.