Yes, people who have the discipline, personality and work role for it, should be allowed to work at home if not all the time, then at least a few times each week. I am definitely more productive (and thus, happier) working from home, though I also know when it serves my work product and relationships to go into a client's office or meet up with teammates in person.
I think, someone, somewhere, has come to the scientific conclusion that human beings can really only be optimally productive for 45 minutes at a time, then they need a 10-15 minute break. So, for me, the issue of productivity then also becomes about what I can achieve during my "breaks" (which should not be defined as "recreational", but simply a shift from doing one kind of task to doing another).
I prefer being able to take my 15-minute breaks in my home office environment because it helps me maintain a healthier, on-going work-domestic balance. So, if I start working at 8/9am and end at 6pm, I get so much more done both in terms of income-generating work, as well as domestic work because 1. I have the option to do both and 2. I don't have to spend 1.5-2 hours commuting. This definitely makes me happier, which is the important bottom line.
I also spend way less money because the "errands" I would do during office breaks almost always involved buying something, whether a cup of coffee or a new pair of shoes I "needed" for an event. (At least in an urban environment, this is a very tempting way to spend "escape"-from-the-office time.) So, in a sense, this behavioral difference adds even more to my productivity since I'm not subtracting $$ from my bank account during the work day.