A Survey of Current Issues
New Horizons in Environmental Economics series
Edited by Tom Tietenberg and Henk Folmer
Chapter 6: The Faustmann Face of Optimal Forest Harvesting
Richard J. Brazee* 1. INTRODUCTION Forests are important natural resources in countries and regions of the world. Forests cover approximately 30 percent of the earth’s land area (FAO 2000). Without human interventions forests would be shaped solely by natural elements including the sun, climate, soil nutrients, topography, weather and ﬁres. Using primarily vegetative manipulations including harvesting, planting, thinning and burning, humans manage forests to meet personal and social objectives. Given the key role of vegetative manipulation, the fundamental question of forestry economics is: when should a tree or a stand of trees be harvested? Answers range from immediate harvest to never harvest. Important speciﬁc harvesting questions include: 1 2 3 When should a stand of trees1 be harvested? Should deforestation rates in the Amazon be slowed? Is proﬁt maximization consistent with sustainable harvesting? A secondary long-standing question is: how can small private landowners be encouraged to more actively manage their forests? The proportion of forest land held by small private owners ranges across countries from virtually none to virtually all. Correspondingly the importance of encouraging small private landowners to actively manage their forests ranges from irrelevant to crucial (Kuuluvainen et al. 1996). The goal of this chapter is to provide a modeling introduction to optimal forest harvesting for economists. A single model, the Faustmann model, serves as foundation for a simple introduction to optimal harvesting (Faustmann 1849 ). The Faustmann model is suﬃcient to span much of the current range of optimal harvesting analysis. Speciﬁcally, the...
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