Kahneman cites Vernon Smith's experiment where Smith distributes a bunch of tokens to his subjects which have different values for different subjects. Smith found they were traded to the people who could get the most return for them. In that case, Kahneman writes, "markets work."
But when Kahneman did the same experiment giving participants coffee cups with their university logo, they would often demand a price to surrender a mug they owned that was more than double what they would pay to acquire the same mug. In such a case, he claims, "markets don't work." (I quote from memory.)
I don't think Mises would be at all moved by this example. When people want the cup they have more than the one they don't, "markets don't work"? Isn't the market giving them just the result they want?