> The idea that the free market will self-correct and optimize outcomes is a well-documented fantasy.
There are far too many documented instances of it actually working to call it a fantasy.
> Markets don’t account for externalities
Markets aren't expected to account for externalities. Externalities are the things you're supposed to tax.
> they concentrate wealth (and therefore political power)
You're describing regulatory capture. This is why governments are supposed to have limited powers. To keep them from passing rules that enrich cronies and entrench incumbents.
> they routinely underprovide merit goods like education, healthcare, and basic research (things that benefit society broadly but aren’t immediately profitable)
Markets are actually pretty good at providing all of those things. There are plenty of high quality private schools, high quality private medical facilities and high quality private research labs.
The real problem here is that some people can't afford those things. But now you're making the case for a UBI so people can afford those things when they otherwise couldn't, not for having the government actually operate the doctor's office.
> As for how to address budget issues, the solution is simple: tax the rich.
Is it so simple? The highest marginal tax rate in the US is 50.3% (37% federal + 13.3% state in California). The highest marginal tax rate in Norway is 47.4%.
Meanwhile most of what the rich own are investment securities like stocks and US treasuries. What happens if you increase their taxes? They have less to invest. The stocks then go to someone not being taxed, i.e. foreign investors, so more of the future returns of US companies leave the country. Fewer treasury buyers increase the interest rate the US pays on the debt. Fewer stock buyers lower stock prices, which reduce capital gains and therefore capital gains tax revenue. Fewer stock buyers make it harder for companies to raise money, which lowers employment and wages, and therefore tax revenue again. Increasing the proportion of tax revenue that comes from "the rich" causes an extremely perverse incentive whenever you ask the Congressional Budget Office to do the numbers on how a policy that would transfer wealth from the rich to the middle class would affect tax revenue, and the policy correspondingly gets shelved.
TANSTAAFL.