> Markets solve the resource allocation problem

Not really. If they did, markets would be more stable. Look at the prices of commodities such as copper. Prices swing up and own by as much as 3x, despite both supply and demand not changing much. That's the problem. If supply and demand have a lot of inertia, and thus lag, the feedback loop becomes unstable. This is basic control theory. Hedging with derivatives was supposed to add stability, but doesn't work very well for that purpose.