> isn't that ... communism?

Setting aside the point that in communism you don't get the max-welfare outcome, you could view communism as a highly unfair mechanism because it gives high wealth-producers a large negative payoff (taxes away most of their wealth) and gives low wealth-producers a big positive payoff. In that sense laissez-faire is exactly fair, giving everyone zero payoff.

This all depends on where you draw the boundaries around the mechanism though.

(Also, you've swept under the rug the problem of equilibrium play in an iterated prisoner's dilemma. It's not as simple as tit-for-tat, of course.)