Uncertainty, Irreversibility and the Loss of Agricultural Land

In the past, evaluations of the transfer of agricultural land to other uses have generally failed to incorporate the issues of uncertainty and irreversibility into the analysis. This can lead to an overestimation of development values. The paper commences with a brief review of the approaches which have been adopted in the assessment of the loss of agricultural land. It is then demonstrated that uncertainty relating to the rate of change of agricultural values through time requires the adoption of a more conservative decision criterion in the evaluation of irreversible land use changes than would otherwise be applied. This is followed by a numerical example and sensitivity analysis. The paper concludes with a discussion of these results.