The capitalist model, the concept of 'disruption', Adam Smith's precepts work well when they allow individuals to control their choices, their fate, their destiny. When the transactions exceed human scale - when they become so big, so far reaching, so expensive that the participants are powerless to make changes, then capitalism fails. It fails because the 'losers' suffer even if they try to adapt. They cannot compet…
There was an idyllic notion in the heads of some of the founders of the US that the many towns could be thousands of little laboratories, each testing their own ideas and then, as a wider community of towns, naturally coalescing around the ideas that worked best. The problem, as I see it, is that they don't have the agility and flexibility of a laboratory or startup. In modern times (in the US), towns act as franchises rather than labs, with the exceptions of large cities and a few other special places.
For example, I think most people can instinctively feel the unpleasantness of a place with large chain retailers and restaurants lining the sides of a 6 lane, 40MPH road with openings and stop lights everywhere. Nonetheless, they're everywhere in the US. Places without these awful (and horrendously expensive) development patterns are the exception. The reason is because the US government pushes development decisions. They do it not by saying 'thou shalt construct car sewers,' but through more subtle means. Since 1934, it has been artificially expensive to build multi-use buildings with dwellings over a shop because you can't get an FHA-compliant mortgage and the accompanying subsidies. We push common road engineering standards, which works great for highways, but then towns build highway-compliant roads in town to get federal grants.
Then each state has its own set of policies that create perverse incentives in curious ways. Actually, in CA the state government did effectively mandate car sewers for decades by deciding that car idling and congestion were environmental impacts that had to be mitigated (with more highway-spec supersized roads.)
Anyway, all this is to say: give local governments a little credit. Certainly some of them are bad, and this article shows a particularly disheartening variant, but in a lot of cases it's an issue of asking mere mortals to prevail over the huge obstructions built by other governing bodies.