I'm not sure what to think about the "smart growth" movement to create communities and towns that are unlike the typical suburban sprawl. My libertarian instinct warns me against these kinds of legal restrictions on property rights. On the other hand, my sense of realism tells me that virtually all towns/cities (except Houston) have some sort of zoning laws anyway, and therefore the debate is not over whether to have restrictions on property rights, but on what the content of those restrictions should be.

Plus, it has always seemed odd to me that some of the most expensive neighborhoods in the country -- think Manhattan, Cambridge, Georgetown, etc. -- are dense, walkable, and functionally integrated, quite the opposite of sprawl. Which makes me ask, If people are willing to pay high prices to live in such neighborhoods, why don't developers build more of them?

Another example: Look at Williamsburg, Virginia. It's a beautiful town that, for the most part, has been kept just as it was in the 1700s, which means it is relatively dense, with shops, churches, and wooden houses all mixed together. And with all the people who pay money just to come and look at it, there has to be some number of people who would like to live in a place like Williamsburg. So again, how come there aren't more developers who build a town that looks like it came out of the 1700s?

In answer to my own question, I'm guessing a combination of transaction costs, path dependence, zoning restrictions that actually prevent such neighborhoods, and the collective action problem. Am I missing something?