not attacking your thinking, but the terms "capitalism" and "free market" aren't consistently well enough defined to capture the nuances of what this type discussion requires. At a minimum, capitalism is the right/ability to own something without others taking it from you, and free markets are markets you can participate in if you would like without asking permission from the govt or belonging to a guild.

capitalism works best for everybody on average when free markets are competitive, but when they are not, markets still work, they just work better for some, worse for others but better than nothing, and also overall worse for everybody because markets are not zero sum. The problem with a lot of what-turns-out-to-be left-wing and or populist thinking on markets is the assumption that markets are zero sum, "if there is a winner, there must be a loser", which while an attractive idea turns out to be false.

same is true of the completely overblown idea that people are not rational. people are not perfectly rational, but when it comes to parting with their money they are much more rational than they are not. If it were not true, people wouldn't be living rationally measurably better lives today than 100, 200, etc. years ago. there are many other sources of noise in measuring that swallow irrationality up with the noise. (yes, selling gambling to gambling addicts is an irrational money printing machine, but civilization has not collapsed)