Government Intervention is Bad. Part of this is because governments are not omniscient, and that even if they were, they are prone to responding to rent-seeking. This goes a long way from saying that there is no role for government. I think, for instance, that there are externalities in the world, and that government is sometimes the best tool available for solving them. For instance, imperfect though it may be, I am glad the US has the Clean AIr Act that it does.
Markets are brilliant.
I never said this either. Indeed, I went out of my way to agree with you that we get problem-causing cycles resulting from developers responding to the wrong incentives. My point was that there may be some empirical evidence that government intervention can produce outcomes that are even worse than the market. You yourself said the question was an empirical one. We are stuck with government, so the trick must be to make governments operate responsibly and effectively.