"The job of market regulation - fundamentally a restriction on your freedom - is to prevent all that bad stuff."
Here's the problem: a "market" that is regulated this way is no longer a market. In order to have a market that works at all as a market, it has to be free in the sense that all transactions are voluntary. If you restrict people's freedom to engage in the transactions of their choice, you break the market; it no longer does what it's supposed to do.
Here's someone trying to rig the stock market. Regulation means that they aren't free to do that. Regulation means that I am free to get a fair market for my stock. I'm more free, and they're less free. (I mean, I also am not free to rig the market, but I wasn't going to do that anyway.
You're free from the threat of murder, which means that I am not free to murder you. Giving freedom always means taking away some other freedom.
The point of regulation is to say that some freedoms are more important than others. The freedom from murder is more important than the freedom to murder. The freedom to get a fair price is more important than the freedom to rig the market. And so on.
Markets work well when the regulations are right. They work badly when the regulations are wrong, or when the regulations are missing.
That's just not borne out in looking at the many markets already functioning under various regulatory schemes for decades now. Lots and lots of markets work as markets, and have fundamentally voluntary transactions, even though certain kinds of transactions are restricted. We've been living in that world for a long time now, and while there's room for debate about what's most functional, there's no credible way to claim that there aren't any functioning markets these days.
> That's just not borne out in looking at the many markets already functioning under various regulatory schemes for decades now.
If markets under all the regulatory schemes we have were actually "functioning", we would not have all the economic issues we have. For example, we would not have the supply chain issues that are currently making the news. We would not have had the crash of 2008, or the Great Depression for that matter. I could go on and on.
> there's no credible way to claim that there aren't any functioning markets these days.
I made no such claim. You're attacking a straw man.
No, I'm attacking the logical implication of your statement. It's a reductio ad absurdum.
You said for a market to work "at all" as a market, it must have voluntary transactions, and people must be able to engage in the transactions of their choice. But nearly all markets do not have those features. Ergo, nearly all markets are not able to work at all, under your premise.
Accepting that most markets do work to a substantial degree, your premise must be wrong.
All useful markets are regulated by the free choices of the market participants of which transactions they will and will not engage in, yes. The idea that a free market, with the definition of "free" that I gave (all transactions are voluntary) is "unregulated" is simply wrong. In a free market, you can't force other people to do things they don't want to do; you have to get them to voluntarily trade with you. That regulates the behavior of all market participants. And it does it better than any regulation by third parties, who have no skin in the game and suffer no penalty if their regulations cause harm, can possibly do.
Unregulated markets lead to exploitative and destructive outcomes 100% of the time. This isn't even a controversial statement, it's just a pithy summary of all relevant history.
Regulation by a centralized entity, to restrict people's freedom to engage in voluntary transactions, doesn't fix market failures. It makes them worse.
> How do you think externalities should be solved?
The only way to solve them is the way suggested by Coase's Theorem: reduce transaction costs to the point where voluntary trades will internalize the externalities. Of course this solution is not always possible, but that just means that in cases where it's not, no solution is possible. There is nothing that requires the universe to always make solutions possible for whatever issues we humans perceive. Certainly it does not follow from the fact that voluntary trades cannot always solve externalities, that government interference in markets does solve them. It doesn't; as I said, it makes them worse.
> How do you think externalities should be solved?
Since government interference with markets involves people making rules who are not parties to any of the transactions in the market and who suffer no penalties when their interference causes harm, government interference itself is an externality. So the claim that government interference can somehow solve externalities is obviously false on its face.
"The job of market regulation - fundamentally a restriction on your freedom - is to prevent all that bad stuff."
Here's the problem: a "market" that is regulated this way is no longer a market. In order to have a market that works at all as a market, it has to be free in the sense that all transactions are voluntary. If you restrict people's freedom to engage in the transactions of their choice, you break the market; it no longer does what it's supposed to do.