>Maybe technically, in the sense that there has to be some sort of overarching enforcement and regulation to have a market.
Actually, you got it exactly backwards, having a free market in the first place is a political choice the government makes. All of this is merely a fiction in our head, without that fiction we are back to the "Law of the jungle". Everything you can take and protect is yours, which is completely at odds with the idea of a free market.
>But the major advantage that the free market has is that it is much better than the government at assessing the relative size of positive and negative externalities.
The free market is the ultimate henchman of the government, it will optimize for the legislated outcome down to every single letter and squeeze every ounce of efficiency available. If the political context allows it, it will happen. If negative externalities are not balanced out via fees, this is equivalent to the government telling every entity in the economy to abuse the externality.
>The government consistently underestimates the positive externalities of free market activity.
No, it underestimates how reliable its henchman is and for some reason it doesn't know how to talk to the henchman even though it's the most natural thing in the world.
>Much like in this case - the people advocating that the government subsidise solar power and commit early have all been shown to have badly misjudged the situation.
Subsidizing solar power is wrong, for obvious reasons. The goal isn't solar power, the goal is the reduction of CO2 emissions and if possible, the reduction of the CO2 concentration in the atmosphere. This requires a stronger cap and trade system or a CO2 price, in theory these are equivalent, in practice the former is prone to too much meddling.
>The free market is much better at getting clean power to people than they thought.
What we need is less government "intervention" and more government activity in the market as the ultimate investor, let the henchman do the actual work.