The Oxford handbook of land economics

T H E OX F O R D HA N D B O O K O F

L AND

ECONOMICS

CONSULTING EDITORS

Michael Szenberg

Lubin School of Business, Pace University

Lall Ramrattan

University of California, Berkeley Extension

1

THE OXFORD HANDBOOK OF

LAND

ECONOMICS

Edited By

JOSHUA M. DUKE

and

JUNJIE WU

Oxford. It furthers the University’s objective of excellence in research,

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3

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Library of Congress Cataloging-in-Publication Data

The Oxford handbook of land economics / edited by Joshua M. Duke and Junjie Wu.

pages cm

Includes bibliographical references and index.

ISBN 978–0–19–976374–0 (alk. paper)

1. Land use. 2. Economic development. I. Duke, Joshua M. II. Wu, JunJie.

HD111.O94 2013

333.73—dc23

2013024328

1 3 5 7 9 8 6 4 2

Printed in the United States of America

on acid-free  paper

Contents

Foreword ix

Preface xiii

List of Contributors xv

Introduction: Land as an Integrating Theme in Economics 1

Joshua M. Duke and JunJie Wu

PART I DETERMINANT S AND DRIVERS

OF LAND USE CHANGE

1. Integrating Regional Economic Development Analysis and

Land Use Economics 23

Mark D. Partridge and Dan S. Rickman

2. Technology Adoption and Land Use 52

David Zilberman, Madhu Khanna, Scott Kaplan, and

Eunice Kim

3. Are Large Metropolitan Areas Still Viable?  74

Edwin S. Mills

4. Modeling the Land Use Change with Biofuels 85

Madhu Khanna, David Zilberman, and Christine L. Crago

5. Modeling the Determinants of Farmland Values in the United States 111

Cynthia J. Nickerson and Wendong Zhang

6. Land Use and Sustainable Economic Development:

Developing World 139

Edward B. Barbier

vi Contents

PART II ENVIRONMENTAL AND

SO CIOEC ONOMIC C ONSEQUENCES OF

LAND USE AND LAND USE CHANGE

7. The Economics of Wildlife Conservation 163

David J. Lewis and Erik Nelson

8. Connecting Ecosystem Services to Land Use: Implications

for Valuation and Policy 196

Robert J. Johnston, Stephen K. Swallow, Dana Marie Bauer,

Emi Uchida, and Christopher M. Anderson

9. Land Use and Climate Change 226

Bruce A. McCarl, Witsanu Attavanich, Mark Musumba,

Jianhong E. Mu, and Ruth Aisabokhae

10. Land Use, Climate Change, and Ecosystem Services 255

Witsanu Attavanich, Benjamin S. Rashford,

Richard M. Adams, and Bruce A. McCarl

11. Fire: An Agent and a Consequence of Land Use Change 281

Claire A. Montgomery

12. Land Use and Municipal Profiles 302

Edward Stone and JunJie Wu

PART III METHOD OLO GICAL

DEVELOPMENTS

13. An Assessment of Empirical Methods for Modeling Land Use 327

Elena G. Irwin and Douglas H. Wrenn

14. Equilibrium Sorting Models of Land Use and Residential Choice 352

H. Allen Klaiber and Nicolai V. Kuminoff

15. Landscape Simulations with Econometric-Based Land Use Models 380

Andrew J. Plantinga and David J. Lewis

16. An Economic Perspective on Agent-Based Models of Land Use and

Land Cover Change 402

Dawn Cassandra Parker

Contents vii

17. Spatial Econometric Modeling of Land Use Change 430

Seong-Hoon Cho, Seung Gyu Kim, and Roland K. Roberts

18. Using Quasi-Experimental Methods to Evaluate Land

Policies: Application to Maryland’s Priority Funding Legislation 452

Charles Towe, Rebecca Lewis, and Lori Lynch

19. Applying Experiments to Land Economics: Public Information and

Auction Efficiency in Ecosystem Service Markets 481

Kent D. Messer, Joshua M. Duke, and Lori Lynch

PART IV THE EC ONOMICS OF

L AND USE L AW AND POLICY

20. Open Space Preservation: Direct Controls and Fiscal Incentives 513

Ekaterina Gnedenko and Dennis Heffley

21. Land Conservation in the United States  547

Jeffrey Ferris and Lori Lynch

22. European Agri-Environmental Policy: The Conservation and

Re-Creation of Cultural Landscapes 583

Ian Hodge

23. Agri-Environmental Policies: A Comparison of US and EU

Experiences 612

Roger Claassen, Joseph Cooper, Cristina Salvioni,

and Marcella Veronesi

24. Stigmatized Sites and Urban Brownfield Redevelopment 648

Joel B. Eisen

25. Regulatory Takings 668

Thomas J. Miceli and Kathleen Segerson

26. Eminent Domain and the Land Assembly Problem 698

Joshua M. Duke

27. Future Research Directions in Land Economics 723

Joshua M. Duke and JunJie Wu

Subject Index 737

Foreword

Few human sentiments are more urgent than place—the place we are born, the place we

become sentient, the place we engage others in a variety of pursuits, and finally the place

we will become dust. Some creatures have their territory. Humans are creatures of their

territory.

It cannot therefore be a surprise that place becomes conflated with land, and vice

versa. The primacy of land can be seen in a number of ways. In some societies, “prop￾erty rights”—shorthand for some presumptive imaginings about individual control

over land—often seem more important than “human rights” (whatever they might be).

History reveals the military and political importance of land. In agrarian societies the

connection between land and economic well-being is obvious. In that regard, it has

been claimed that economic development and attendant urbanization will diminish the

economic importance of land. This now seems improbable. Indeed, one could make a

plausible argument that land will become of increased importance in the future. The

contents of this marvelous volume would certainly support that hypothesis.

Those of us who are modern know well the Lockean Creation Myth—God gave land

to all in common and then admonished us to take control of it and make it flourish.

From this mischief all manner of tragedy has followed, whether we have in mind the

near-complete annihilation of indigenous peoples the world over, or the near-misses of

European wars of mutually assured destruction throughout recorded history. Land is

always worth a good (or bad) fight.

Happily for those of us who are economists, land is also—and always will be—worth a

good debate. And good debates lead to good science.

The chapters included here offer profound insights into many of those debates. Josh

Duke and JunJie Wu have arranged for an impressive lineup of experts to address, with

clarity and rigor, the important issues requiring good analysis and coherent solutions.

An important undercurrent here, and one that explains many of the difficulties in

crafting workable public policy to address problems in land use and land use change, is

the conceptual inconvenience that land is a fictitious commodity [Polanyi, 2001].1

. . .labor, land, and money are essential elements of industry; they also must be orga￾nized in markets; in fact, these markets form an absolutely vital part of the economic

system. But labor, land, and money are obviously not commodities; the postulate that

1 Karl Polanyi, The Great Transformation, Boston: Beacon Press, 2001.

x Foreword

anything that is bought and sold must have been produced for sale is emphatically

untrue in regard to them. . . .Labor is only another name for a human activity which

goes with life itself. . . .; land is only another name for nature, which is not produced

by man; actual money . . .is merely a token of purchasing power. . .which comes into

being through the mechanism of banking or state finance. None of them is produced

for sale. The commodity description of labor, land, and money is entirely fictitious

[Polanyi, 2001, pp. 75–6].

The inconvenience of land as a fictitious commodity arises because economic mod￾els can only do the necessary work when they are deployed in the service of answers to

questions that motivated their creation in the first place. All models are context spe￾cific, and they are only useful if their deployment in new settings is consistent with the

assumptions underlying their essential structure. The test of all models is whether or not

they are good to think with.

For most economic models, various quantities of a particular commodity can be

arrayed along one axis, and the various prices of that commodity can be arrayed along

another axis. Unfortunately for land and land use changes, the commodity fiction ren￾ders this problematic. It is, of course possible to plot acres/hectares of land along one

axis, and it is possible to refine that depiction by incorporating some index of “quality.”

But that may not satisfy some who refuse to see land in that light. Equally problematic,

the other axis in our models reflects yet another fictitious commodity—money.

Suddenly we see why there are so many profound debates about land. The very con￾cepts and models that allow us to analyze markets for “real” commodities—toothpaste,

bread, houses, cameras—offer up seriously contested concepts when we must deal with

land (nature). Two obvious problems arise. First, many people refuse to accept money

as a plausible measure of the value of land—the one fictitious commodity cannot be

mapped into the other fictitious commodity. Second, many people refuse to accept the

idea that land (nature) is a commodity. Note that for the concept of a commodity to

have any meaning in economics it must be capable of assignment (ownership). This

introduces the concept of “belonging to.” Native people say that land does not belong to

them—they belong to the land. The implication of this notion may warrant a brief elab￾oration. Recall that the essence of a normal commodity is that when it moves through

markets the only thing that really matters is that there is a change in its ownership. That

is what markets do—they mediate changes in ownership of those commodities that “pass

through” markets. And since ownership is itself yet another social construct, we see the

layering of contestation that will always attend economic analysis of land, land use, and

land use change.

We disregard these concerns at our peril. If we hope to produce policy relevant

insights concerning the contested realms of land, we must speak to a large audience of

sapient adults who refuse to accept quite fundamental presumptions in our models.

Science practiced in disregard for shared human meanings is impertinent.

The various chapters here admirably spell out the contested nature of figuring out how

to think about what is better to do with respect to land. I like to say that there is no such

thing as land, there is only land tenure—social rules that bestow on certain individuals

Foreword xi

a circumscribed suite of capacities concerning what can and cannot be done with that

thing we call land. And this reminds us that when we study land we are really poking

around at the outer limits of presumptions concerning who gets to define the rules by

which land use—and land use change—shall be determined. It seems we are back to the

matter of presumptive “rights” over land. And as we know, rights are not inherent but

worked out:

Only those economic advantages are rights which have the law back of

them. . .whether it is a property right is really the question to be answered [Justice

R. Jackson, Willow River Power Co. 324 US 499, 502 (1945)].

In other words, economic advantages are not protected because they are rights.

Rather, those settings and circumstances that a society chooses to consider valuable

are given protection under the cover of “rights.” We see that economic advantages are

bestowed by the political class. Suddenly we grasp the fount of contestation over the

manifold advantages of owning this thing called land.

Daniel W. Bromley

Madison

October, 2011

Preface

Land use change is arguably one of the most pervasive socioeconomic forces affecting

ecological systems, economic systems, and human wellbeing. Almost all major environ￾mental problems, including climate change, water pollution, and habitat destruction,

are rooted in land use change. Many socioeconomic phenomena, such as urban sprawl,

suburbanization, urban redevelopment, and economic segregation, are also deeply

ingrained in land use change. In response to the great need to study these environmental

and socioeconomic phenomena, many new developments have taken place in the field

of land economics during the past decade, justifying a new handbook in the field.

This volume draws on recent advances in several literatures that investigate land use

behavior and policy, including natural resource economics, environmental economics,

regional science, and urban economics. The contributors of this volume are the eminent

scholars in the field and the newer experts, who work at the frontier of the field. Starting

from inherited theories and analyses, this forward-looking handbook seeks to become a

“must” reading, not only for those who are new to the field, but also for those who want

to extend their knowledge to the frontier of land economics.

There are various ways to use this handbook. This comprehensive treatment of land

economics provides an excellent source of readings for a graduate course in land or

resource economics. Although the length and diversity of methods may make it difficult

to cover in a single semester course, instructors may seek to focus on a subset of chap￾ters. For instance, a course might be structured around the chapters on the ecosystem

services of land and a few related methods chapters. Or, the focus might be on cutting

edge methods in land economics, supplementing the methods chapters with seminal

articles in general economics on equilibrium modeling, auction theory, and specific

econometric techniques. Researchers and policy analysts will find that the book offers

the state-of-the-art in land economics research. The depth of coverage on the methods

chapters offers researchers a structure for setting up their own analyses. The applied

chapters can serve either as a starting point for learning about markets and incentive

problems associated with land topics, or as a source of citable research results and syn￾thetic conclusions from experts in the area. Those with less familiarity with economics

can also use this handbook to understand what is known and unknown on a given topic

area. This will help noneconomists, policy makers, and grant funders to articulate better

hypotheses, policy goals, and funding opportunities.

We are profoundly grateful to our chapter authors for their outstanding contributions

to this handbook. We also acknowledge the insights of our colleagues around the world,

who inspire us with their research and collegiality. Among a very long list, we would

xiv Preface

like to single out Daniel Bromley and Kathy Segerson as our mentors, who shaped our

lives—research and otherwise—at a deep level and to whom we owe a great debt. We

would also like to recognize the other leading lights in our professional lives, includ￾ing Emery N. Castle, Richard M. Adams, Bill Boggess, and David Zilberman. Finally,

we thank our friends and colleagues for their advice and encouragement during the

long process, especially Titus Awokuse, Kathleen Bell, Rob Johnston, Lori Lynch, Kent

Messer, and George Parsons. Finally, we are grateful for the support of our Universities,

whose combined land grant missions have promoted the advancement of integrated

land economics research.

Joshua M. Duke, Newark, Delaware

JunJie Wu, Corvallis, Oregon