"Market failure precedes regulation." Pithy way to put it by JM Roth. True? Seems likely to me and since it appears to be a matter of fact, it would a useful way to forward this discussion as it gives us something firm upon which to base our opinions.
The only proviso I have is that zoning emerged as a way to systematize and apply broadly the results of many discrete nuisance law cases as much as from market failure i.e. the courts were analternative but it appeared more efficient to zone an area for so that the sresult which would come after a court case could be applied before there was a problem. That's my understanding, anyway.
But in general, it seems like a pretty plausible theory. In fact, by way of exception, can anyone think of a regulatory regime which has developed in the absenece of market failure. (Of course I imagine we can now push back the matter and debate where and when there is indeed "market failure.")