Efficiency and innovation

One of the things that I'm supposed to get from all this economics is that in theory, the free market is efficient and the government is not so efficient. That's why staunch free-marketers want a lot of deregulation because it's supposed to help things run better. They argue that when the big government steps in with it's bureaucracy it slows things down.

Or as Ronald Reagan put it "The problem with government, is that there's too much of it!"

I think I understand why people would feel that way and there is some truth to this line of thinking. That's why, for example, I've been encouraged to work in the private sector because "government and not for profit don't pay as much, and there's not much work to do there".

Ok cool, so how come governments are so efficient when it comes to defense and military stuff???

I mean, it's the military/government that sent men into space. It's the military that invented the internet, in the 60's! And I just found out it's the military that invented RFID, in the 50's!

And the list goes on. VW Beetle: military. Swiss army knife: military. The computer: military...

So let's see, government is big and inefficient. And if you wanna get things done efficiently, the private sector will do it for you. But the when it comes to military stuff, the government can be extremely efficient...

I mean the atomic bomb sounds like a very efficient weapon to me.

So how come this free market efficiency stuff doesn't apply here?