In the real world of unregulated markets, successful players get larger and in many instances use the resulting economic power to drive or buy out weaker players to gain control of ever larger shares of the market. The larger individual and more collusive market players become, the more difficult it is for newcomers and small independent firms to survive, the more monopolistic and less competitive the market becomes, and the more political power the biggest firms wield behind demands for concessions from governments that allow them to externalize ever more of their costs to the community. Given this reality, one might expect the economic rationalists to be outspoken in arguing for the need to restrict mergers and acquisitions and break up monopolistic firms to restore the conditions of a competitive market. In other words, they espouse a theory that assumes small firms and advocate policies that strengthen monopoly. Another basic condition of efficient market allocation is that the full costs of production must be born by the producer and be included in the producer's selling price.
Economists call it cost internalization.
This condition is so basic to market theory that it is rarely disputed even by the most doctrinaire of free market ideologues. If some portion of the cost of producing a product are borne by third parties who in no way participate in or benefit from the transaction, then economists say the costs have been externalized and the price of the product is distorted accordingly. Another way of putting it is that every externalized cost involves privatizing a gain and socializing its associated costs onto the community. Externalized costs don't go away-they are simply ignored by those who benefit from making the decisions that result in others incurring them. For example, when a forest products corporation obtains rights to clear-cut Forest Service land at give away prices and leaves behind a devastated habitat, the company reaps the immediate profit and the society bears the long term cost.