I'm not an expert on the topic but there have definitely been bubbles and recessionary periods. It was argued that if we let the banks fail it would have cost more money than bailing them out. In any example you can say here's the government policy that lead to the economic crash but there are times when capitalism crashes the economy (ie risky bets on the housing market, dot com bubble, great depression, etc). I agree that in the long term, everything returns to equilibrium but we can do better than having these huge speculative upswings and subsequent crashes.
There are definitely negative externalities that need to be avoided by having a government. Perfect example is that companies would pollute the shit out of the world if we didn't have environmental regulations. Companies would kill people if we didn't have proper regulation for food/medicine (ie upton sinclair, the jungle). Sure, if people knew what company was providing them the food that made them sick, they could buy food from someplace else, but you still let a lot of people die in the meantime.
I don't think the government runs efficiently, but just because there's waste and inefficiency in the FDA or government in general doesn't mean we should get rid of it.
Here is why I hate politics from the libertarian party website: "We should replace harmful government agencies like the Food & Drug Administration (FDA) with more agile, free-market alternatives. The mission of the FDA is to protect us from unsafe medicines. In fact, the FDA has driven up healthcare costs and deprived millions of Americans of much-needed treatments. For example, during a 10-year delay in approving Propanolol Propranolol (a heart medication for treating angina and hypertension), approximately 100,000 people died who could have been treated with this lifesaving drug. Bureaucratic roadblocks kill sick Americans."
