I believe capitalism can work well on a micro-scale when the products are simple enough that consumers can exert perceivable pressure on producers. Make a better hammer? I'll buy a better hammer.
Where modern capitalism falls down is complexity. There's 3 (non-niche) desktop operating systems, for example, and way more than 3 attributes that consumers care about in a computer. Or cars, or TVs, or airplanes, or anything else that costs more than $20. There's simply not enough levers by which consumers can send any meaningful signal through the market to producers. This breaks the Invisible Hand.
Where modern capitalism falls down is complexity. There's 3 (non-niche) desktop operating systems, for example, and way more than 3 attributes that consumers care about in a computer. Or cars, or TVs, or airplanes, or anything else that costs more than $20. There's simply not enough levers by which consumers can send any meaningful signal through the market to producers. This breaks the Invisible Hand.