UNCERTAINTY,IRREVERSIBILITY AND THE LOSS OF AGRICULTURAL LAND: A RECONSIDERATION

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.