the government can be a penalty condition in the objective function, and recently it's effect has been almost completely eclipsed by the near term gains.

You are forgetting about the influence of government subsidies. What would the housing market be like if home mortgage interest payments were not, and had never been deductible? Think back to the 70s, when mortgages had double-digit rates.

Would the US be swamped in HFCS, would we be producing ethanol, were it not for subsidies?

I agree with you on the importance of education. However, incentives matter, and government can incentivize both to the positive and negative.