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The Economics of Timber: A Renewable Resource in the Long Run

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  • Peter Berck

Abstract

Critics of current and historical trends in timber production contend that private owners cut their woods more quickly than optimal while public managers cut their forests more slowly than optimal. Using the Douglas fir industry, this paper shows that private entrepreneurs holding rational expectations with respect to future prices have historically been discounting the future at a real rate of 5 percent -- a much lower rate than that available for other private investments -- and, therefore, that these owners have not cut their forests prematurely. In the case of public management, calculated shadow losses incurred by holding old timber are so great that an appeal to nontimber use values is not sufficient to reconcile management practices. Finally, predictions for the long-term price trends for timber indicate a slowdown in the rate of price increase.

Suggested Citation

  • Peter Berck, 1979. "The Economics of Timber: A Renewable Resource in the Long Run," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 447-462, Autumn.
  • Handle: RePEc:rje:bellje:v:10:y:1979:i:autumn:p:447-462
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    References listed on IDEAS

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    1. Edwin Mansfield & John Rapoport & Anthony Romeo & Samuel Wagner & George Beardsley, 1977. "Social and Private Rates of Return from Industrial Innovations," The Quarterly Journal of Economics, Oxford University Press, vol. 91(2), pages 221-240.
    2. Mansfield, Edwin, 1980. "Basic Research and Productivity Increase in Manufacturing," American Economic Review, American Economic Association, vol. 70(5), pages 863-873, December.
    3. Berndt, Ernst R & Christensen, Laurits R, 1974. "Testing for the Existence of a Consistent Aggregate Index of Labor Inputs," American Economic Review, American Economic Association, vol. 64(3), pages 391-404, June.
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    Cited by:

    1. Callaway, J.M., 2000. "Assessing the Costs and Market Impacts of Carbon Sequestration, Climate Change and Acid Rain," Other publications TiSEM c58adec9-1535-46cf-b213-b, Tilburg University, School of Economics and Management.
    2. Charles Sims & David Aadland & David Finnoff & James Powell, 2013. "How Ecosystem Service Provision Can Increase Forest Mortality from Insect Outbreaks," Land Economics, University of Wisconsin Press, vol. 89(1), pages 154-176.
    3. Edna Tusak Loehman, 2014. "Social Investment for Sustainability of Groundwater: A Revealed Preference Approach," Sustainability, MDPI, Open Access Journal, vol. 6(9), pages 1-41, August.
    4. Couture, Stéphane & Cros, Marie-Josée & Sabbadin, Régis, 2016. "Risk aversion and optimal management of an uneven-aged forest under risk of windthrow: A Markov decision process approach," Journal of Forest Economics, Elsevier, vol. 25(C), pages 94-114.
    5. Vincent, Jeffrey R & Gillis, Malcolm, 1998. "Deforestation and Forest Land Use: A Comment," World Bank Research Observer, World Bank Group, vol. 13(1), pages 133-140, February.
    6. Newman, D.H., 2002. "Forestry's golden rule and the development of the optimal forest rotation literature," Journal of Forest Economics, Elsevier, vol. 8(1), pages 5-27.
    7. Géraud Krähenbühl, 2015. "Supply Analysis of the Forestry Industry," IRENE Working Papers 15-08, IRENE Institute of Economic Research.
    8. Sorda, Giovanni & Madlener, Reinhard, 2012. "Cost-Effectiveness of Lignocellulose Biorefineries and their Impact on the Deciduous Wood Markets in Germany," FCN Working Papers 8/2012, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    9. Gardner M. Brown, 2000. "Renewable Natural Resource Management and Use without Markets," Journal of Economic Literature, American Economic Association, vol. 38(4), pages 875-914, December.
    10. Berck, Peter & Bentley, William R., 1987. "Hotelling's Theory, Enhancement, and the Taking of the Redwood National Park," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt4p805216, Department of Agricultural & Resource Economics, UC Berkeley.
    11. Ando, Amy, 1997. "The Price-Elasticity of Stumpage Sales from Federal Forests," Discussion Papers dp-98-06, Resources For the Future.
    12. Piazza, Adriana & Roy, Santanu, 2015. "Deforestation and optimal management," Journal of Economic Dynamics and Control, Elsevier, vol. 53(C), pages 15-27.

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