The free exchange of goods and services is necessary for the functioning of a modern industrial economy. It is not just because freedom is good in itself, although it is. It is not just because free competition spurs companies to produce better goods at lower prices, although it does.
It is that in order to makes decisions within a modern economy, it is necessary to compare relative values. You can’t do that unless you know the prices of things, and the only non-arbitrary way to set prices is through agreement of a willing buyer and a willing seller.
So the economics profession is perfectly right to start with the concept of free markets as a premise. The problem is when that concept is taken to a self-defeating extreme. Free markets are not the same thing as the absence of rules and regulations. If that were do, Lebanon under the warlords or Haiti after the earthquake would be the greatest free market countries in the world. The New York Stock Exchange draws investors from all over the world because they have confidence that a listed company’s financial report bears some semblance to reality, and that a broker is not trying to rip them off.
To say that rules and regulations as such are inconsistent with the free market is like saying traffic lights and speed limits are inconsistent with free driving. You could make the argument that individual drivers are better able than traffic police to decide when to stop and start and how fast to go, but that is not a freedom that would be meaningful to me.
The test of a proposed law are regulation is (1) whether it is consistent with basic Constitutional rights, (2) whether it promotes the common good and (3) whether it can be enforced impartially.
For insight into what happens when decision-makers decide that “free markets” can function without law and regulation, I recommend Yves Smith’s book, ECONned: How Unenlightened Self-Interest Undermined Democracy and Corrupted Capitalism and her web log, naked capitalism.