Study On The Externalities And Socially Rational Decision-Making Of Rural-Urban Land Conversion

Rural-urban land conversion which is an unavoidable part in socio-economic development would bring up various economic, ecological and social effects that affect on urban growth and rural development. Therefore, whether the rural-urban land conversion decision making reasonable or not will result to the changing of social welfare directly. Decision-making of rural-urban land conversion in China today is a kind of private decision-making that aiming at the maximization of economic interests and has a certain degree of distortion, because the externalities that arise from land use activities and the uncertainty and irreversibility in land use changes are ignored. For this reason, this research attempts to return to the decision-making of rural-urban land conversion nature of social public decision-making, from an idealistic social decision-maker's (a social rational agent's) perspective to establish a complete rural-urban land conversion social rational decision-making analytical framework. Specifically, through the introduction (assumption) of a social policy maker who is the representative of the interests of all social members, this paper gives a brief analysis on decision maker's attitude toward risk and his decision-making objectives in certain decision-making environment. Then it makes social costs and benefits to substitute for the private decision-making criteria of private costs and benefits, and compared the results of these two as a basis for our decision-making according to the theory of Cost-Benefit Analysis. At the same time, the uncertainty and irreversibility which exist in the process of rural-urban land conversion objectively are also considered in our decision-making as the important influencing factors. With regard to this, it uses the Real Option Theory which is appropriate to deal with the high risk, uncertainty, irreversibility decisioin making problems to answer the question about how to delay the decision-making in order to waiting for a more appropriate conversion time. Finally, this paper gives the optimal conversion timing when the rural land (this study refers to arable land primarily) should be converted to various uses of urban lands (traffic land, residential land and industrial land).This paper attempts to provide some new ideas and useful references for our rural-urban land conversion decision makers and land administrators by studying on the decision-making of rural-urban land conversion systematically and quantitatively, namely: to guide the realistic policy makers and managers to have much deeper awareness of allocating land resources between agricultural and non-agricultural sectors and the significance of its impacts on economy, society and ecology that may arise, and try to provide a basis for the decision-making of rural-urban land conversion; to give some recommendations for them that to take the social welfare's enormous losses which would generated from the excessive loss of agricultural land into account sufficiently, and thus they should make decisions more rationally and cautiously to reduce the social and ecological hazards who originates from the irrational decision-making and the excessive pursuit of economic interests as much as possible, and at last the level of social welfare will be improved by transfer rural land to urban land moderately and timely. To achieve this goal, on the basis of theoretical analysis, this study takes Hongshan District (in Wuhan City of Hubei Province) which is one of the main urban areas as a typical example to carry out our researches and discussions from the following aspects:First of all, the basic elements of socially rational decision-making of rural-urban land conversion are described, in which an ideal decision maker——Social Decision Maker is shaped to represent the interests of all members in our society. The whole research proceeds on this agent's perspective. In addition, this paper identifies the characteristics that socially rational decision-making of rural-urban land conversion has, the result shows that: it is featured of social public, multi-criteria, uncertain and irreversible. This part of contents lays a theoretical foundation for carrying out our research successfully.Secondly, because decision-making environment will affect decision-maker's judgments and decisions especially the expectation on uncertain factors in future directly or indirectly, this paper analyzes the macro decision environment of Wuhan City that Hongshan District (empirical study area of this paper) belongs to from three aspects: stage of economic development, changes in social demand and development of the sustainable land resources allocation concept And then it infers the social decision maker's risk attitude in the environment discussed above showing the characteristics of risk aversion distinctly.This conclusion provides a theoretical basis for dealing with the uncertainty existing in long-term dynamic decision-making for our following research. Furthermore, this paper analyses the objective of the rural-urban land conversion decision-making, and explores the fators who affect the realization of its' general goal of maximizing the social welfare. It can be concluded that the general goal of socially rational decision-making should include three sub-goals: economic goal, ecological goal and social goal; the preference of social decision makers and the value judgment of interest groups are two crucial factors which determine the realization of the rural-urban land conversion decision-making objectives. Therefore, decision maker and social members should be conducted to pay more attention on external benefit and cost produced in the process of rural-urban land conversion, and set up decision goals by establishing a correct criterion of value judgment. That's also the reason why we select social cost and benefit analysis as the main decision-making method in this paper.Then, from the perspective of social decision-maker and based on the welfare of all social members, the decision-making of rural-urban land conversion is simplified to be a course that the decision-maker are making choice between 'preserve the rural land' and 'develop it'. That is to say, it considers the net social benefit of preserving rural land and developing it as the social cost and social benefit that come from rural-urban land conversion respectively, and then evaluated them separately to prepare for determining the optimal conversion opportunity. In this part, it take four common uses such as traffic land, residential land, industrial land and educational land into account and assessed their net social benefits respectively, because the urban land uses that rural land converted to have wide range of possibilities and the net social benefit that arise from each use has significant difference. Empirical study area shouldn't be too large due to the heterogeneity of lands, so this part select Hongshan District in Wuhan City as our empirical study area.Finally, this paper compares the traditional decision-making theory with the Real Option Theory, and basing on the qualitative analysis and quantitative calculation in our previous paper, it adopts the Real Option Theory which is appropriate for dealing with the issue of uncertainty and irreversibility to solve a problems: which is the optimal timing for conversion when the social decision-maker facing an opportunity of rural-urban land conversion in Hongshan District.