Sprawl is an aggregate result of optimal individuals’ location decisions and consumers’ choices that minimize their out-of pocket costs in a market distorted by subsidizes and suburban local land use regulation (Ewing 1994).  Some of these subsidies favor transportation infrastructure for private automobiles (Renner, 1988; Cameron, 1991; Voorhees, 1991; Hason, 1992a and 1992b; and MacKenzie, 1994) and the design of unnecessarily large and extensive sewage systems (Binkley et al., 1975).  Suburban owner-occupied housing is heavily subsidized through the income tax code (Raup, 1975 and Fischel, 1982).  In fact, Lee concludes that “market imperfections define sprawl and provide the justification for public intervention to discourage sprawl (1979)”.  However, the effect of governmental regulations such as zoning ordinances, subdivision regulations, and building codes are found to compound market failure, encouraging low-density development and the strict separation of land uses, thus causing sprawl (Richardson and Gordon, 1998). 

Sprawl is encouraged by government subsidies that may not cause people to move to the suburbs but lower the costs, skewing the factors individuals weigh when making a location decision (Longman, 1998).  Some public policies such as inflexible zoning codes and deductibility of mortgage interest and real estate property tax also favor dispersal of settlement (Gordon and Richardson, 1998). As a result, sprawl is a process of cumulative causation where the dominant feedback loops (these subsidies and public policies) are self-reinforcing instead of self-correcting as they are in equilibrium models (Atkinson 1996).