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UNCERTAINTY, IRREVERSIBILITY AND THE LOSS OF AGRICULTURAL LAND: A RECONSIDERATION
Author(s) -
Kennedy John O. S.
Publication year - 1987
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.1987.tb01026.x
Subject(s) - value (mathematics) , agriculture , land value , agricultural land , option value , land values , economics , land use , computer science , natural resource economics , microeconomics , geography , ecology , biology , archaeology , incentive , machine learning
A previous article has discussed how the irreversible transfer of land from agricultural to urban uses should be addressed (Hodge, 1984). If the future value of land in either use is uncertain, some additional value should be placed on a decision which keeps future options open by retaining land in agriculture. It is argued that Hodge's estimates of the value, known as quasi‐option value, are unsatisfactory, and revised estimates are provided. More fundamentally, the usefulness of quasi‐option value as an operational concept is queried. It is better to solve irreversible decision problems under uncertainty as stochastic dynamic programming problems.