| In a world where humans are have rational, then your argument would be correct. Alas that's not the world we live in, as history keeps telling us. Firstly, let's consider "2 groups". This might be racial, or straight/queer or religion or immigrant status or wealth or whatever. This issue crops up all over history (think Irish immigrants) - society has a habit of splitting into us and them. Ultimately the split is economic - one group contains much economic power, (which is largely analogous with political power) the other far less. The group with the economic power is seeking to preserve it, the other group is trying to move economically upwards. So to your first point - exclusivity might depress utility, but it increases value. The free market offers high premiums to exclusivity. So far from being a dumb business plan, it maximized business returns. Above all, rich people want to live in a bubble of rich people - and zoning laws, the free market, etc (controlled by rich people) work towards this goal. Then we toss in the notion of "my home is an investment." When you see your home as a store of wealth, then you make communal decisions to preserve that wealth (at all costs.) Will that new bridge, school, office block, anything, make the value of my home go up or down? Pretty much nothing rlse matters. From this arises push-back laws that try and regulate the worst of these tendencies away. They're almost always fighting the inclinations of the haves to the have-nots. They are often contentious because they go against the natural inclinations of the economically advantaged. Fundamentally your argument is flawed because those with economic power work hard to keep it. Part of that is actively working against the interests of those without. The market is very much not free. |