Here's a pretty good summary of the main point.

"Therefore if we rely on consumers to factor in the total cost to society when making a decision, (which is what happens in a for-profit model), in most cases we will never discover the optimal solution for the market because of this basic flaw of human nature. Our reliance on for-profit entities means we often find ourselves stuck in a horrible equilibrium where each individual transaction seems to be worth making, for both parties, but the real net cost far outweighs the benefit."

Obviously this is not true of every market but examples abound, andI think Facebook Connect is one of them.