This goes all the way back to Reagan and the notion that markets will act rationally and in their own best interest. We now know this is not true. Markets are driven by short-term gains, and chaos. So it is not a question of regulation or no regulation, it comes down to the essence of markets and how they operate. For example, today, no one in their right mind can argue that AIG was acting rationally, responsibly, or in their own interest. No one can argue that banks betting on an infinite housing bubble were rational. And no one can argue that we have free markets when we have companies that are too big to fail; that can take down the national and global economies.Continuing off topic:
Why does everyone seem to think that this is a dichotomy? Regulation or no regulation? It was (somewhat) regulated with poorly considered regulations before, what is required now is not a complete absence of regulation, or total government control, but simply better thought out regulations. The choice is not between regulation and no regulation, but between bad regulation (what was) and good regulation (hopefully what will be).
Taleb argues that we don't even have a model for the emerging global economy; that the old rules don't apply anymore.