I am aware of, though not read in, the most influential capitalist libertarian thinkers (Hayek, Friedman, Nozick, Rand, etc). As far as I understand it, their general point is that an unrestricted free market promotes (or is required for) individual freedom, because it is more efficient at meeting human needs and rewarding effort.
However, I have been increasingly concerned, examining historical events and watching the spread of corruption and crime in recent years, about a simple question... which, as far as I know (could be wrong), runs contrary to capitalist libertarian and Marxist conclusions.
I am reading an article on the meth epidemic in the USA, from this month's issue of The Atlantic. It's a good read, and one issue raised is that innovations in the production of crystal methamphetamine have vastly increased access to a more dangerous variant of the drug. Essentially: the efficiency of the unregulated criminal free market is harming society in profound ways few people anticipated.
Capitalist libertarians all seem to assume market efficiency is naturally constructive, but have any of them argued that it may be naturally destructive? To be clear: I am not arguing from a Marxist position, where it is assumed that market efficiencies lead to increasing inequalities and monopolies, into an almost feudal conclusion of ownership.
1) Does the efficiency of the free market, with criminal enterprise operating internationally, undermine the state's ability to enforce rule of law? Thus, leading to the disintegration of the democratic-capitalist-liberal system, resulting in chaotic failed states?
2) Specifically: Have any big name libertarians or economists discussed the question of whether market efficiency favours criminal activity, and thus if the free market undermines itself? Or any similar subject, regarding the relationship between legal and illegal marketplaces.
I would like references to books or essays for further reading please.
EDIT: To clarify a query made by 'Joe W'; less legal restriction isn't the same as no legal restriction. E.g. Hayek and Friedman as far as I know weren't advocating for an absence of government or law enforcement.
Another point which has been raised is the contradiction of terms: 'criminal free market'. Legal and illegal marketplaces exist simultaneously and interact with each other, and the latter operate less according to legal/cultural constraints and more according to pure supply and demand. In that case it is very important to understand what the big named libertarians and economists have said on this relationship and the relative efficiencies of legal and illegal marketplaces.