Sure, I understand the idealized theory; it just doesn't match what actually happens in most complex systems (take fluid flow, for example, where increasing pressure increases flow rates... until a critical threshold at which flow becomes turbulent). I don't think markets are well-understood enough to apply this idealized theory without empirical evidence that assumptions aren't violated. It's not a priori clear to me that there don't exist situations where increasing market participation leads to decreased market efficiency as friction effects or internal market dynamics start dominating.
Even a case where an innovation decreased market efficiency (of this does happen - all players would love to have a monopoly), the trend is for the market to work towards increased efficiency.
I'm no hard-core libertarian, but unless you have outside interference in a market - big tire 5 use government to mandate a tire-selling license that presents a barrier to entry - or one of those markets that lead itself to creating natural monopolies, this is the way things work.
That's just an assertion based on idealized economic theory; not evidence that things work that way in particular situations. In particular, you haven't explained why there are either a priori or strong empirical reasons to believe that greater market participation never produces adverse effects. Evidence from nearly every other complex-systems discipline, ranging from hydraulics to meteorology to ecology, points in the direction that such "well-behaved" systems characterized by general relationships, valid in all regimes, are quite uncommon; and instead "phase-change" type thresholds at which behavioral regimes change are the norm.
>greater market participation never produces adverse effects
I never said it didn't.
I said greater market participation increases innovation by default, regardless of the quality of said participation. You are the only one equating the behaviour of the markets to being either "good" or "bad". The reality is that these are not concepts the market understands or cares about.
Innovation can and does destroy entire markets all the time. But unless you feel innovation itself is horrible and we should be writing these arguments with typewriters and cabling them to each other, you simply have to accept the reality that innovation will occur all the time in every direction.
