Not flawed, but very, very complicated. The theory of free markets holds a lot of very well reasoned and tested lessons that can be instructive, depending to which principles you are referring.
Newtonian principles does a really good job for a huge number of use cases, but it isn't the end all.
When it comes to intertwining human taste, a doctrine of equal opportunity combined with private property, and scarce resources, I don't want to throw the baby out with the bathwater.
It’s also the case that market-ideals tend to become miserable to experience in practice if you approach them too closely.
Usually the discussion of that kind of thing revolves around the near-elimination of profit via (hypothetical) too-perfect competition among producers and too-perfect information for consumers, but with the rise of automated mass-scale spying and automated finer-grained price discrimination (plus enormous consolidation of markets due to near-abandonment of anti-trust enforcement in the ‘70s), we’re kinda seeing the real deal play out the other direction: approaching-maximum extraction of profit from every transaction.
Which sucks, to put it mildly. You do not want markets that function “too well” in any direction.
Free markets as described by Econ 101 don’t apply in any sector where advertising is useful.
Far more complicated theories get much closer to reality, but aren’t nearly as well known outside of economic circles.
The irony is that rental markets are probably one of the better markets to apply Econ 101 principles. Yes you have problems with information asymmetry, but for the most part you have a huge number of relatively small buyers and sellers, and prices freely ebb and flow based on supply and demand conditions. So if you are going to analyze the effect of algorithmic pricing in the real estate market, starting with the simple free market assumptions actually is not a bad idea at all.
It's also common practice to show the effect of something on an idealized free market, with the idea of being that even under supposedly ideal conditions, the something being analyzed is still problematic.
It works for single family homes, but it breaks down when you start talking about multi-tenant facilities.
There are far fewer single family homes on the market and they are a lot harder to bring up in the market. However, multi-tenant facilities cost a lot less to bring to market but there are few owners of those buildings.
With a much smaller set of unit owners, it makes collusion a lot easier to pull off. Only a few facilities need to participate in order to raise the prices and once it goes up for the large owners the smaller owners will happily raise their prices because "it's competitive with market rates".
The part that's totally divorced is that the cost of these units has nothing to do with business expenses and everything to do with market availability. A new player can't really come in and disrupt things and even if one or a few actors start undercutting the others it doesn't matter because they only have so many units they can sell which will fill up quickly.
The whole thing has driven up housing prices to the extreme. My 15 year old home is worth 5x the price I purchased it at. That actually scares me. I couldn't afford my home today and I can't afford to really move into a nicer home in the future.
The closet they actually come to existing is in black markets because regulations exist.
Your typo actually works in context.
They don't apply anywhere. It's a 101 class. It's over simplified. It looks accurate enough but a first order approximation isn't enough to operate effectively in the real world. It's like thinking you can code if you're able to read psuedocode. It's a great outline, but there's a lot of little things in between that ends up being >90% of the lines of code you need to make a working program
Can gravity buy out magnetism?