That's not necessarily true. I see network effects as something of a negative externality, one that is hit particularly hard by the tragedy of the commons. The problem is that even if every single person on Facebook decided that YourBookSpace was a better website that provided more value, no one would leave because until everyone else followed, your network wouldn't be there.

    This type of dilemma is known as a collective action problem.

The collective action problem either did not exist or was not a sufficient problem to prevent FB from overtaking MySpace. The Tragedy of the Commons actually worked as an exploitable marketing angle for FB in the form of exclusivity (initially at least). The winners will turn their disadvantages into advantages.

What most on HN don't want to admit is that the brilliance of their code or the beauty of their design alone are not enough to guarantee success. We still have to market our wares and if the value derived from our code+designs isn't greater than the value provided by CL's network + usability + cost then that doesn't mean we call our parents or a referee or a senator and tell them we need the playing field leveled because the end users are too lazy to see how deserving we are of their business.

Paper classified still exist, web based CL alternatives still exist (Backpages.com is a big one), CL is not a monopoly and a "superauthority" is not the answer.

And how would we know when a "superauthority" needs to step in, "judiciously applied" is subjective. Successful passing of SOPA would have been "judiciously applied" "superauthority" in the eyes of the entertainment industry.

   The free market doesn't work on its own.

I'm of the belief that the free market isn't perfect, maybe not even close to it, but I don't think you've explained how the free market has failed to address the HN community's "perceived" problem that CL presents.