Your argument is clearly flawed because it goes way too far. It applies to literally any sort of economic activity it's possible to be engaged in. For example, I could make all your arguments as reasons why the California state government should take over pornography production from private producers. We know from experience that private industry is more successful than the government at many things…including building housing:

https://en.wikipedia.org/wiki/Public_housing_in_the_United_S...