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The problems with capitalism usually arise from government interference. Beyond providing basic infrastructure (such as courts, law enforcement, defense and a money supply), most govt'l interference is, with the best of intentions and with a desire to help, deleterious. There are a number of reasons why this is so, starting with inability to get complete information from a remove; inflexibility of structure once implemented; free-riding by political constituencies; lack of market or other consequential discipline for the decisionmakers; disregard of moral hazard; agency costs; failure to prioritize outside crisis; one-size-fits-all decisions, etc etc etc etc. The bottom line is that govt is just not well-equipped to make economic decisions or forecasts. That doesn't mean the govt is incapable of doing some good things, but as a general rule the less involved the govt is in the economy, the less distortion there is. And that applies to everything from health care to real estate.
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