According to that definition we don't have a free market and in theory we will never have a free market. Which is ok. The idea of a free market is an ideal to strive towards. The problem with the idea of a free market though is that in practice it is used as a political weapon for the sake of specific interest groups rather than to the benefit of everyone. No attempts to make markets more free are visible.
People argue against land value taxes and carbon taxes. These policies are intended to reduce externalities and reduce the amount of force necessary to live a good life. Imagine all the wars fought because we have inefficient land allocation schemes or all the damage caused by climate change leading to loss of soil fertility in specific countries and the following refugee crisis. In a hypothetical free market wars would be pointless because you can always get what you want through mutual agreement, for a fair price and without any violence.
Who decides when "dealing with externalities" has been done in a proper way?
The very word "externalities" and the state of the global environment don't inspire much trust in the efficient management of "externalities" through capitalism.
Pointing this out doesn't mean that I am a socialist ot communist, I don't like this this kind of black and white thinking.
Wouldn't "efficiency" mean that we use natural resources sustainably?
