If free enterprise does not produce innovation, or is inefficient at it, then unfree economies should be fountains of innovation. I haven't noticed any such coming from such economies.
The argument isn't black and white. We're a "free economy" but we still control and regulate certain things in the market. The argument is that this is a specific instance where our "free economy" is failing and so we should use government to address that. It bears no comparison to "unfree economies."
