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The causal connection can be remarkably tenuous, especially if you add securitization or other financialization into the mix. The people supplying the money often care more about hitting standards than maximizing overall eventual profit. Understanding this aspect of human and market behavior is useful for realizing why a lot of libertarian ideas are unworkable in practice.

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Not sure, it's very workable for lots of other aspects of buildings.

Eg I don't think there's a legislation that floorplans have to be useful (and how would you even define that in the abstract). Yet, most buildings have quite reasonable floorplans.

There's some transaction costs in that its hard for the eventually consumer of the building to express all their preference to the builder. As you say, for some aspects the price signals can be weak.

More competition can help.

See also how it's pretty easy to find restaurants that serve tasty food, despite taste not being legislated nor regulated.

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