@ChrisMayLA6 Well, misallocation is only a problem depending on what starting point you have. If your starting point is that people do not have the right to their own property and the fruits of their labours, then misallocation is certainly a thing.
But if your starting point is that you have the only right to the fruits of your labours, then by definition, the way I choose to allocate my resources, as long as I am allowed to do it freely, is the perfect allocation, given my goals there and then.
Of course, after the fact, I might discover mistakes, so the capital or resource might be misallocated based on my understanding of the situation, but that can only be argued based on my choices, and not based on anything external, since no one external has a right to my property.
So it does seem to me that for that to make sense, and in fact for taxes to make sense, one must abandon the idea of private property in order not to be inconsistent.
As for Smith and what areas are not best dealt with by markets, could you please give me a reference or two? I have not read his works, so this could be very interesting to look more into.