How would we know the real-world properties of a theoretical concept from economics? We understand pieces of economics, but certainly not the whole thing. Let's say we make the market free-er and free-er. Apart from politics junkies, who knows for sure how that behaves?
What we (ie. the government) can do is ensure no entities own the entire supply chain, so you can't run a fab and also market finished consumer goods. That way, manufacture of consumer goods (including the software) from the raw fabricated parts gets a much lower barrier to entry.
We can also force consumer manufacturers to advertise all "features" that we deem to be important. We already do things like energy ratings, why not privacy ratings too? The more information consumers have the better.
Make no mistake, any capital intensive industry like electronics will degenerate into an oligopoly without government, or you can dream of a day where everyone can print semiconductor wafers at home.