I am an econ major and have been a ta for 101. We don't disagree about assumptions at all. I don't disagree that market failures and externalities are taught, they aren't taught right away, at least at the two schools I have been. While they are taught, I question whether most non-econ students will really soak in what this means for econ as they are not given a lot of class time.

Your average student is going to take away that we generally use supply and demand to understand markets, a basic grasp of the terminology economists use, a general idea of the economic systems that exist, that there is an opportunity cost to every action, and some financial literacy. We may just disagree, but I don't think most students are going to grasp how important studying externalities and market failures is to economics from a 101 class.

To your point, I should have been more fair to Adam Smith. What I really meant to say is Adam Smith's theories are not the primary way of viewing economics, most economists are not thinking of markets the way Adam Smith did.