ABSTRACT
This chapter applies the idea that the economic efficiency is a subjective concept which comes from the viewpoint of a particular observer to study the efficiency of institutions. It explores the efficiency of institutions of land use conversion by comparing the current zoning system with the tender offer system as proposed by Colwell. The chapter discusses the various conceptualizations of efficiency. As a globally recognized criterion for judging efficiency it takes into account all agents involved in the implementation of an institution. The chapter compares different institutions of land use conversion and it looks at the role of government. With regard to land use conversion, Colwell (1997) has proposed a tender offer system, in which the risk that is caused by the government can be eliminated. In the tender offer system, the role of the government is neutral. It is not involved in the development, and the conversion of land use is a simple contractual relationship between landowner.
