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Lumifer comments on Google vs Wikipedia, for-profit vs not-for-profit - Less Wrong Discussion
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Nope. For it to work requires nothing but the usual prerequisites for markets (property rights, sufficient freedom, etc.). You are talking about producing optimal results which, as far as I know, no human economic system is capable of.
I wonder whether christopherj & you might be using "to work" in different senses here. A market might be able "to work" in the sense of being operational (where sellers successfully sell things to buyers) while failing "to work" in the sense of generating benefits greater than the side effects of externalities (the invisible foot's kick overriding the more benign gestures of the invisible hand).
I use "work" here not in the sense that the markets are operational. I use it in the sense that societies with working markets (and without "massive ... product-specific tariffs and subsidies") develop and grow much faster than societies without working markets. That is an empirical observation.
I never said that the "invisible hand" would fail to function, I said that it would function inefficiently. Since efficiency is the major factor in deciding whether an economic strategy "works", I noted that it would be out-performed by a system that can account for externalities. The free market could be patched to optimize things that contain externalities by applying tariffs and subsidies.
Given that I know of no system to properly account for externalities, I noted that as a failing of the free market but did not suggest any alternative -- especially since my country already has this patch applied to some of the biggest and most obvious externalities, yet also shows signs of promoting the wrong things (eg corn based ethanol).