I don't claim The People are incapable of making correct decisions in a market. I only claim that they are irrational actors, and the hypothesis of Free Market sans regulations should probably be tested in some manner before being confirmed theory by its pious adherents.
You ask a very difficult question, and I know not the answer.
It's fairly obvious the regulatory bodies that exist today are corrupted.
Perhaps some sort of regulatory body that, per industry, is charged with prosecuting these types of lawsuits. A matrimony of lawyers and scientists-of-the-field instead of lawyers and business-people-of-the-field, perhaps: A bevy of prosecutorial lawyers governed by a board of scientists of the given field.
An EPA governed by environmental scientists instead of .. oh, wait! The last few directors of the EPA _have_ been environmental scientists. Perhaps if the agency had teeth and claws instead of throw pillows and accusatory fingers. But the cries of woe from Big Chemical if that ever came to pass! It would be so unfair!
An FCC governed by communications and data scientists instead of telecommunications lobbyists.
An FDA governed by doctors, toxicologists and clinical nutritionists.
But you asked specifically about electing a government. Again, I never claimed that The People are incapable of making correct decisions in a market, only that The People are, at the individual level, irrational actors without perfect knowledge of said market.
Gauss's law predicts that we will never, with a democracy or a republic, have a perfect government. We will, on the other hand, never have a truly deplorable government. We will just have an average government. We won't pick the best people for the job -- or, usually the worst. We'll pick the middle of the road, the mediocre, the Just Average, the fellow we'd like to have a beer with.
You ask about correctness -- how do you determine correctness? How do you determine that every choice was made without error? I suppose you could relegate the governing body to software written in Scheme - at least then you could prove that the software is correct!
But correct is, probably, not quite the word you were looking for.