[eszed]

I agree. To expand your point, that requires upstream regulation of trash incinerators (and road safety, which I'll ignore because developed economies mostly have that at least nominally in place), to make sure it's not a noxious neighbor. Where that doesn't exist, there will be pressure for (blunt force and inefficient) zoning codes to keep the smelly stuff away.

That works for incinerators (which I know - yay technical progress - can be made unnoticeable) but not for things that are irremedially (for now) obnoxious. The answer, I think, is again to put the onus of regulation on the actor by saying: you can't put thing within these sorts of areas unless you achieve these liveability targets; in return, a previously conforming industrial plant, or airport, or whatever, would be protected against being forced out of existence because neighbors encroach and then change the zoning rules. (This actually happens.)

There will be edge cases and problems, of course, but I think they're better problems than current zoning regime. Critically, this encourages continued development of industrial process and practice: build a better incinerator and you can build it in more places.

I believe Japan's zoning system has some of these features.