It's called negative externalities - the free-market unfortunately doesn't account for all costs.
If I smoke a cigarette - I only pay for the cigarette - but it's those around me that also get sick from the second-hand smoke. That's why the government taxes them.
Likewise, if I buy a gas-guzzling SUV, which churns out black smoke to all my neighbours around - I only pay for the gas - but it's those around me that also suffer.
Basically, if we apply your logic, then we would live in a every-man-for-himself society, where we'd do whatever we could to get ahead, and not care about the impact on those around us.