Actually RAW can deal with a pretty magical society (unless you throw in epic magic, when it still can but it gets different). The standard tippy-verse stops at the point it does not because I can't take it farther but because it makes gaming in it pretty difficult. The cities become effectively nut houses who do truly random and outrageous (apparently) things because they are bored. But if you interject a few little tweaks it becomes playable.
Let's assume that one day teleportation magic just appears. This is day 0. On day -1 the most advanced teleportation magic around was Dimension Door, and then on day 0 Boccob came down and now every mage can learn the teleportation line of spells.
On about day 1 a number of wars start and a number of leaders are assassinated as soldiers are teleported straight into cities and castles. These wars go on for a good chunk of time, until the cities become effectively armed camps that an enemy won't survive just teleporting into. Well now the surrounding villages become targets. Eventually those people head into the cities because they are at least relatively safe there. Well now the cities need a way to feed these people. Create Food and Water traps can take care of that. A disintegrate trap can take care of all the waste.
Well now that the people have food it's time to get them work. They can't go outside the cities because they won't be protected or safe. The armed men are needed to defend the city and so the local monsters have come back and reclaimed a lot of the previously inhabited territory. This means gaining raw materials is very difficult. So a mage whips up a fabricate trap that spits out blocks of various raw materials. At the same time the decision is made to whip up another one that spits out clothes. Well all those clothes (and any other goods you feel like making traps to produce) are identical. Only the poorest who can't afford custom clothes wear them.
Well now that everyone is making stuff it's time to deal with trade. Some cities want to be able to trade with or defend each other easier. So they construct permanent teleportation circles between each other to facilitate travel, as it's not possible to survive an overland journey.
There, you have the cities taken care of without going to the extreme of assassination games.
Now what about the monsters and people who aren't in the cities? Well the wilds is the area in between the cities and it's mostly ignored. None of the monsters out here are a real threat to the golem and warforged legions of the cities (built to defend against each other). So the smart ones tend to avoid the cities. And now they have a lot more ground to inhabit as most of the people who had been taking their territories are now in the cities. The people who either didn't want to go too the cities, left the cities, or are stuck in the wilderness live largely like standard greyhawk D&D. Magic is rare. Why? Because unlike the cities where most everyone is taught at least basic cantrips and the more capable are taught higher level magic, that kind of educational system doesn't exist. Sorcerers and druids are the main casters out here, with a number of psions and some clerics of the more nature oriented gods. But all magic is pretty rare. Continuous warfare with the various monsters, very little trade, and being relatively small groups living at subsistence level makes them a very minor irritant to the cities at best.
Every once in a great while a band of these people is more successful and settles down into a city. And eventually they connect to the network of teleportation circles and become a minor city (under the protection of one of the older cities that can defend it against other cities).
Likewise, every once in a great while a city is destroyed for any number of reasons. And it's population is now in the wilds, most likely thousands of miles from the nearest city, with minimal supplies or survival skills. Those that survive generally form new bands and continue the cycle.
The primary driver for magic altering the world drastically is not it's effects on the economy but it's effects on warfare. You can't defend against a teleporting army except by already having a sufficient force at the location attacked. And that means that cities get defended while smaller concentrations of population get sacrificed. And once you have the majority of the population living in the cities you have to feed them. Well you can't defend farms and the city. So you resort to magic. Same with gathering raw materials. Once that is taken care of you get to the economy.