Term Paper: Economics of Forestry Timber

Pages: 10 (2871 words)  ·  Bibliography Sources: 1+  ·  Level: College Senior  ·  Topic: Transportation - Environmental Issues  ·  Buy This Paper


[. . .] Current environmental policy holds that maintaining or liquidating one's capital is widely considered a matter of individual choice. However, it should now be clear that when ecosystems are at risk, such freedom is not absolute but is constrained by real material and limits, by real connections with and obligations to others, and by the need to preserve future possibilities in the face of what may turn out to be at best unsustainable, and at worst fatal resource demands and impacts.

Individual freedom must be balanced with concerns for the common good. However people come to define such a good within these larger emerging ecological and social realities. If we can see these limitations clearer, our efforts to maintain the productive capacity of forests will be more effective. Our concerns about the continued productivity and functioning of forest ecosystems might then more realistically encompass their many components, structures, and processes as they all interact to maintain an evolving yet ongoing system. This is the true meaning of sustainable resource management.

The Economist's View

The next categories are great interest to forest economists because they are the areas with which they are most familiar. Topics of interest include: structure and scale of regional or national economies (Input/Output Analysis); employment, income, and their distribution; distinctions between income and wealth; natural and manmade capital; capital depreciation; internal and international trade; pollution; investment; social accounts; demographics, etc.

The first concerns macroeconomic attempts to improve the system of national or regional accounts connecting the flows of products, wages, and income in the economy with the stocks supporting those flows, both in the human economy and as natural resources in general. These stocks include traditional items such as forests and minerals as well as the potential for natural services. The primary concern is the structure and scale of economic activity and its dependence and impact on Nature.

As major fluctuations in the business cycle are still the central concern of most governments, questions concerning the sustainability of the natural world have assumed major importance. While we recognize that if a level of income is only maintained by drawing down the stock of capital on which it is based, one would soon have no income.

What tools are currently available to Analyze and Manage Timber Production?

Howard Hoganson and others at the University of Minnesota have developed specialized models for forest management planning. Their initial goals sought to recognize more modeling detail than practically feasible using conventional linear programming techniques (Hoganson and Rose 1984). They wished to address the inconsistencies in valuation and management presented at the beginning of this report by Farber. Similar in approach to linear programming, but rather than solve the linear programming formulation, Hoganson and Rose's model focuses on duality theory and the dual formulation of the problem. This dual formulation has an economic interpretation similar to basic extensions of the classic Faustmann approach to forest management decisions. In this interpretation individual management units can be analyzed independently using shadow price estimates, rather than market prices, to value resources and product flows. Such shadow prices tie sub-problems together by reflecting the impact of forest-wide constraints. The Hoganson and Rose approach was first applied in practice to consider wood energy potentials in northeastern Minnesota (Bradley and Lothner 1981). Hoganson and Rose (1989) developed DUALPLAN, a fairly generalized microcomputer model for these purposes.

The access to and transport of harvested timber must be considered in the sustainability of a forest. It is not only the tree which is harvested that is effected, it is also all of the vegetation which is in the way to remove it. A timbering road is also a consideration in sustainable forest management. The number of possible wood transport decisions in combination with harvest timing decisions is too large for a practical linear programming formulation. Instead, DTRAN, another program included in DUALPLAN, utilizes simple maps of the forest to determine wood transport patterns. Procurement zones for specific markets in specific time-periods change as shadow prices change throughout the solution process. Using maps and interpretations of intermediate solutions may help address other forest resource issues techniques (Hoganson and Rose 1984). This program is new technology, which may help us to better manage our forests in a sustainable manner.

Effective Policymaking

Ecological and economic interactions increasingly occupy national and international discussions. Some of the topics involved are business regulation; pollution abatement; income and cost distributions of various environmental damages; public health issues such as the ozone-skin cancer relation; population growth; and all manners of global issues such as climate change and deforestation. Previous policies have either been for or against big business, pitting the two sides against each other. When big business takes an action, which destroys or harms the environment, a fierce court battle often takes place. Future policy needs to focus on making these two side non-combatant.

Costanza and Perrings (1990) provide an example of how to combine what we now know about the uncertainties of environmental protection with what we also know about the difficulties of more direct forms of social control such as regulation or outright prohibition. In order to develop more cost effective, less intrusive, and generally more positive stimulus to protect and/or manage environmental use, they evaluated a flexible assurance bonding system. This bond would be required by developers and would be set equal to the largest estimated potential environmental damage that might occur from the proposed action. The bond would be kept in an interest bearing account and would be returned to the developer with some of the interest as soon as the firm proved that the damage would or could not occur. If the catastrophe did occur, the bond would be used to compensate those harmed or help repair the damage. But no further payment would be required from the developer.

Their proposal had several advantages: The firm would know at the outset what the bond would cost and could plan accordingly. The bond would be proportional to the seriousness of the problem. Costs would be shared among the responsible parties and Private and social costs would be in accord. But two other provisions are suggested. Monitoring systems should be provided with the most up-to-date information to minimize surprise and monitoring costs and the burden of proof should be born by those who stand to profit, not the general public. This solution seems as if it would be a good resolution for everyone involved.


The problem of effective and sustainable forest management is clear. As our population increases so will the urgency of this dilemma. It is now imperative for economists and ecologists to work together to solve these problems. New technology in forestry management combined with incentives for responsible management will help to pave the way to better understanding between parties and ultimately lead to better sustainable practices, so that the timber industry will remain profitable in the future. Better forestry management is necessary for the future of the human race.

Works Cited

Bradley, Dennis. "One of two parts of a chapter on EE for the Ecosystem Stewardship."

Workshop held in Tucson Arizona, December 4-14, 1995.

Bradley, D.P. Xu, Zhi, and Lewis, B.J. "Forests as Natural Capital: Parallels, Problems, and Implications." Unpublished paper: NCFES, Forest Service, USDA, St. Paul, Minn. 43

Bradley, D. And D. Lothner (ed.). "Achieving wood energy potentials: evidence in northeastern

Minnesota." Gen. Tech. Rep. NC-114, USDA FS, NCFES. 82 p. 1981.

Costanza, R. And Perrings, C. "A flexible assurance bonding system for improved environmental management." Ecological Economics. 2(1):5775. 1990.

Detwiler, R.P. And Charles A.S. Hall. "Tropical Forests and the Global Carbon Cycle." Science 239:42-7. January 1988.

Farber, Stephen and Dennis Bradley. Ecological Economics. University of Pittsburgh. 1996

Hoganson, H., and D. Rose. "A simulation approach for optimal timber management scheduling." Science. 30(1):220-238. 1984.

Insights. Population Growth vs. Forest growth. 2002. http://www.insights.co.nz/people_industry_ci.asp# Accessed May 2002.

International Bank for Reconstruction and Development/The World Bank

1997 http://www.ttsd.k12.or.us/district/nis/chris/mnt/cdrom/html/stats/for.htm. Accessed May 2002.

Lewis, B.J. "Value and valuation methodology in forest and natural resource management contexts." Unpublished paper prepared under contract number: 28-C4-843 for the Rocky

Mountain Forest and Range Experiment Station, Forest Service,… [END OF PREVIEW]

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