So, in the case of traffic, pollution and housing construction --- it is clear to economists what policies ar needed to address inefficiency. Unlike a dentist (whose advice is often listened to), the economists who advocate road pricing, carbon taxes, and eased red tape on developers all are facing the challenge of implementing their ideas.
Without road pricing, traffic congestion grows worse at a time when our value of time continues to rise. Without carbon pricing, the risk of extreme climate change rises. Without encouraging developers to build, home prices rise in productive cities. This enriches incumbents but prices out young people (especially those whose parents aren't wealthy).
The obvious explanation for this slow pace of policy reform are income effects. The people who will lose from these policy changes recognize that they will lose and they are using their political clout to block these changes. A wise economist who seeks to implement these efficiency enhancing reforms needs to devise a policy to offset these income effects. In the case of the carbon tax, economists talk about tax and dividend such that people will receive a share of the tax revenue collected. Reasonable questions can be asked concerning whether it is credible that these dividend checks will continue to be paid or will future governments keep the revenue for pet projects and to conveniently cover future deficits? Second, the actual dividend that each household will need to offset the income effect will differ by household depending on where the family lives, the family's occupation and lifestyle. For example, a Houston family who lives 25 miles from the city and whose portfolio is invested in fossil fuel companies will need a larger dividend check than a San Francisco Tofu eating downtown resident who codes for a living and invests in a socially responsible index fund.
The public policies listed above both seeks to change the prices people face but also to shift property rights. The incumbent rights holders want to keep their property rights and this is what slows down the policy reform. Who has the property rights here?
As I think back to my economics training, we studied how markets allocate goods given that property rights are well defined. If I own a left shoe, then I must buy a right shoe. In the real world, much of the policy debate is scrambling for who has the property rights to different scarce goods. In the case of roads, the atmosphere and land, a tragedy of the commons is playing out.
A Tiebout optimist would say that if a city could get its rules right, then such a city would attract workers and firms and it would grow and it would serve as a guinea pig signalling to other mayors what they could achieve if they introduced "good rules". This was the Charter Cities logic.
An optimist would also point out that when cities face fiscal deficits that they will see out new sources of revenue and taxation of roads, pollution, and payments from developers all generate such revenue. I am still looking for cases in which mayors implemented policy reforms that enhanced the efficiency of their city.
There is an analogue in macroeconomics. When nations have a deficit, do they allow inflation to take place or do they make tough budget cuts? Different interest groups have different goals here. When does efficiency enhancing policy emerge?