My main problem with the formalists is that I am not convinced they are trying to solve the correct problem. And as a foundationalist type, I'm not sure that solving the wrong problem will help.
Having said that, here's David Brin on the problem:
[The problem is]: the perversion of "free enterprise" away from its Smithian meaning of maximized competition and toward a meaning that Adam Smith openly, repeatedly and vociferously despised... the protection of uneven influence and collusive power in the hands of private oligarchy.
Let us be plain. Across 4,000 years of recorded history, there has been no greater enemy of open competition than collusive, wealth-centered aristocracy. By comparison, the horrific reign of Soviet communism was a brief flash (and the "nomenklatura" caste in the USSR was arguably just another owner-conspiracy class). And today's libertarian obsession with civil servant "regulators" pathetically ignores the real enemy, across 40 centuries...
..an enemy that killed every market until Smith came upon the scene, and that has done everything in its power - through the promulgation of Culture War" - to distract from the word "competition." The word that ought to be the true focus of any genuine libertarian. Any libertarian who was not a monstrously hypocritical dunce about human nature and history, that is.
There's a reason that it took 3800 years of recorded history to get growth liftoff. A good chunk of that reason is the aristocracy. (The rest is the formalist point -- violence). If you don't have competition, the people get it good and hard from whoever doesn't have to compete. Aretae's 3rd law.
Now, Brin goes on to push for a solution, and like most solutions, it's substantially less impressive than the diagnosis, but still worth looking at:
And I have yet to see anyone explain cogently why 5,000 conniving golf-buddies, appointing each other onto each others' boards and granting each other 100 $million bonuses while calling each other "geniuses" and raping their stockholders...I'd critique this on public choice grounds, but not too aggressively.
...are inherently better managers than 50,000 highly educated civil servants, answerable to solemn codes of accountability, regularly audited and subject to open scrutiny, to prevent their self-interest conflicting with the job they are charged to do. By Hayek's own calculations, the latter group is VASTLY preferable! Moreover, Adam Smith would have said so, as well.
Of course, the BEST solution is genuine competition, with only enough government regulation to ensure that the market functions well as our primary engine of problem solving creativity. If 50,000 accountable bureaucrats are better than 5,000 secretly colluding oligarchs, then 5,000,000 small and medium-scale businesses are even better. They are more likely - by Hayekian reasoning - to discover the alternate paths and most creative solutions.
I'd of course be looking a lot better had I put my words together and posted on this after my comment to Devin a week or two back. (Non-violent) Competition is the whole deal. If you don't have competition, then whoever isn't in competition wins big. If you do have competition, whoever is competing loses. And most (99%+) of what government does is prevent competition.