I was reading this paper by Melvin Conway (not the game of life Conway). In it he states that the product of a design team creates an imprint on the product that simulates the communication structure of that design team. Thus, the more subunits a team has, the more rigid the possible answers to the question the team is trying to answer; everything in the finished product aligns with the communication structure of that team. So if one team creates and engine and another team creates wheels, you have made the choice that the engine and wheels will not have any significant overlap in their function or design. Thus, you rule out all possible end products where the engine is in the wheel, or the wheel has some major effect on the function of the engine.
There's a law called Brook's Law that states that, when assigning new members to a team of designers, you also increase the amount of effort taken to communicate, which adds to the overall time for production and decreases efficiency
Now I'll go for an anecdote. In Nazi Germany, the fascist government allocated resources through a massive clerical workforce. Every company that wanted resources allocated to them submitted paperwork for that resource and competed with others through assessment of necessity, which was decided by an overseer. This essentially turned the entire German economy into a massive committee. That committee was only able to create things that aligned with its communication structure; in other words, it lacked flexibility. This was because, according to Brook's Law, adding manpower to a late project makes it later. When your economy is one big committee, Brook's Law states that it will lose efficiency because communication time starts to increase dramatically, and one cannot change that fact.
So then, why is a free market more efficient? Because communication about the necessity of resources between interested parties is handled by an automatic outcropping of each individual's actions. "Vote with your dollar" is the cliché, but I think it can be described better. Each dollar changing hands in exchange for resources or services creates a "ripple" that combines with every other ripple and creates an overlapping waveform that can be interpreted at a glance. If an oil field somewhere across the world closes production due to a strike, then the price of oil goes up. Thus, an individual without knowledge of the event in any capacity, sees the higher prices and decides not to take that vacation road trip across the US. In the end, even though no party made the telegram, information about the change in gasoline supply was communicated through higher prices and ultimately prevented the frivolous waste of a now-more-scarce commodity. This is the core mechanic of the free market. Adam Smith's "invisible hand" is actually an aggregate communication device that collates input, output, and necessity into a single easily-understood value that individuals are highly motivated to pay attention to.
So why does communism not work? Because a communist government tries to replace this organic information system with human effort. Brook's Law, here, throws a wrench into those works. The more humans you throw at a problem, especially without proper groundwork (i.e. purges, corruption, idealism), the less efficient the system will become. The failure of communism is as simple as that. No human or system of humans can replace the naturally-occurring information distribution network of supply and demand-based pricing indexes. Conway's Law and Brook's Law converge to create a system of government that is simultaneously stuck in its tracks, impossible to shift, and horrible at allocation of resources.
In the end, free markets work because no one is trying to make them work. They are just individual agents who are out to make the best lives for themselves. Through the communication power of floating commodity and service prices, individuals are given all the information they need to make decisions that not only benefit themselves but also, unwittingly, everyone else associated with that sector of the economy.
I'm not saying that a completely unregulated free market is best. As long as an economic system's main pathway for the dissemination of information regarding the scarcity, availability, and necessity of goods and services is a free floating index, and as long as individuals can use their currency to purchase those goods and services from anyone in good faith, then said system can handle a few laws that restrict its operation. As long as the spirit of the free market is intact, then the economic system will flourish.
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