". . . Our basic finding is that, as a result of takings threats by regulators, land value can decline significantly because development flexibility has been restricted. . ."Sometimes I just have to wonder what we economists are up to with our time. The model developed in this paper seems just a fine model, but it seems to me this "basic finding" is pretty evident. I know, there surely is much complexity in land valuation to consider, but at the same time, isn't it pretty clear that the threat of government force directed at land use decisions on my parcel will diminish the value of that land to me and to others?
Tuesday, August 22, 2006
Sometimes I Have To Wonder
I just looked at: Timothy Riddiough, "The Economic Consequences of Regulatory Taking Risk on Land Value and Development Activity," J. Urban Econ 41, 56-77 (1997). The author develops a mathematical model of a "real options approach" to land valuation and land development decisions in order to consider the economic impact of regulatory takings with less than full compensation. Here is the author's finale: