So you have to take a step back, and look at political incentives. How are you going to convince these people to support putting their capital at risk?
It's still the correct solution.
The correct solution is to let corrupt and reckless institutions fail.
Just because the deck is stacked against the actual implementation of the correct solution because of 'big money families' and so on doesn't nullify the correctness of the solution.
See regulatory capture and moral hazard for why our system is screwed.
Power means never having to say you're sorry. If you're not part of the elite, your only realistic options are to become part of the elite, or to change the game (i.e. create a new elite including you and those you care about) in some way not easily anticipated / countered by the current elite.
Moreover, free markets have no moral content. Quite apart from unrestricted transactions creating injustice, free markets reward scarce resources in high demand. But something being in high demand does not make it virtuous - fashions change with the wind - and nor is there necessarily virtue in rewarding the owners of those scarce resources, which may be sheer luck. As a collective, we only want markets that are free to the degree that they are not also unjust; and that's a much harder problem.
And wouldn't it be great to design airplanes in a world without gravity? It would make things so much easier!
For your example just considering the airplane, the air would have no reason to stay near the earth, nor would there be any reason for the matter in the earth to coalesce.
The sun would also almost immediately explode because of the immense pressures required to produce nuclear fusion.
You can't have free markets in the way you advocate in the presence of democracy as we know it. To argue for what you want, you need to describe how we would change our governmental structure to make it work. Perhaps an authoritarian rule by a benevolent AI?
I.e. we could say "let corrupt institutions fail", but there's another powerful team that doesn't want them to fail, and can thwart our efforts. If we don't take that into account when designing the solution, we're doomed to fail.
> It's still the correct solution.
Well, no, that's what we're debating.
Does that sound naive to you? Because that, to my ears, is exactly what you are advocating. You're completely ignoring institutional mechanics with a mere handwave of "correctness".
No, it is the dumbest solution picked out of a menu of solutions. If we accept there are "too big to fail" institutions, one way to get rid of them is to wait for them to fail. Much like if we have 8 unsafe airplanes, one solution is to wait for them to crash. The other solution is to enact policies that make these institutions smaller (like I originally proposed).
Look up Free Banking on Wikipedia for Example.