Economics of Sustainable Forestry
- LAST REVIEWED: 10 August 2020
- LAST MODIFIED: 28 September 2016
- DOI: 10.1093/obo/9780199363445-0060
- LAST REVIEWED: 10 August 2020
- LAST MODIFIED: 28 September 2016
- DOI: 10.1093/obo/9780199363445-0060
The concept of sustainable forest systems finds its origins in the European concept of sustainable yield forestry and the regulated forest. The concept of sustain yield is commonly attributed to Germany in works such as D. M. Gould’s article The Future of Forests in Society, which locates the origins of the sustainable yield idea in feudal Germany. Franz Heske’s argument in German Forestry from Yale University Press (1938) characterizes the situation as reflecting a “diminishing timber supply and expanding consumption (that) at last lead to a crisis” (p. 20). These crises were thought to have occurred periodically between the 13th and 16th centuries. The crises led to attempts to regulate timber cuttings to insure that forests and forest outputs were maintained. Forest management was introduced in most of the large German state forests during the first half of the 19th century and spread to France and surrounding countries as noted by Lee in his article “The Classic Sustainable Yield Concept,” Gould in The Future of Forests in Society notes that after 1800 systems of forest management began to be viewed as scientifically based.
Although the concept of sustainable forest systems almost surely originated as a biological concept, the early concerns were for forest and wood availability. The ideal became sustainable yield or what the Society of American Foresters (SAF) 1958 calls a “plan for forest management (that) implies continuous production with the aim of achieving, at the earliest practical time, an appropriate balance between growth and harvest.” A popular textbook of the latter 1900s, Davis 1966 uses a looser definition for sustainable management, simply the “continuity of harvest” (p. 5). The objective of a sustainable forest is to obtain an age structure of the forest trees that allows for a balance between cut and growth. This situation is often called a “normal” or “regulated” forest. In such a forest the volume of the periodic harvest of a cohort equals the net growth volume that occurred over that period. Upon achieving this age structure, an annual harvest of a certain volume can be maintained in perpetuity. This outcome requires that the reduction in forest stock associated with the harvest is just offset by the increase in forest stock due to growth that occurs on the remaining forest. Although such a situation has traditionally been associated with a specific forest or forested area, sustainability may be achieved through coordinated management across different forest landscapes, as shown by Sohngen, et al. 1999. The notion of sustainable yield associate with the regulated forest, however, not only reflects an asset that is maintained for continuing productivity but also is sometimes viewed as a symbol to maintain an obligation to future generations to leave the forests and their productivity, as in Duerr and Duerr 1975. Lee 1982 shows German forestry’s familiarity with this concept. The breakthrough on the economics of sustainable yield came earlier and was provided by Faustmann, which correctly calculated the age rotation at which forest stands should be harvested to maximize the economic returns from the forestry operation. In his 1848 paper, Faustmann correctly determines the harvest conditions that maximize the financial returns over time. He shows that with a positive societal discount rate the income-maximizing financial rotation is determined by incremental growth rather than average growth. Faustmann’s result was confirmed many years later by Ohlin 1995. However, the initial question of “when is a tree mature for harvesting” maintained in contention between economists and biologists for decades. Subsequently, Samuelson 1976 noted that biologists examining this question have argued that the harvest should be grown for maximum sustainable yield harvest volume. This is achieved if harvest occurs when the average annual increment of volume growth begins to decline. Although this biological rule maximizes the sustainable harvest volume it does not generally maximize financial returns to the forest asset. Only if the social discount rate is zero do the biological optimum and financial optimum coincide.
Davis, K. P. 1966. Forest management: Regulation and valuation. New York: McGraw-Hill.
Presents a less technical, more intuitive, and flexible statement of the concept of sustainable management.
Duerr, W. A., and J. Duerr. 1975. The role of faith in forest resource management. In Social sciences in forestry; a book of readings. Edited by F. Rumsey and W. A. Duerr, 408. London and Toronto: Saunders.
Argues that forest sustainability has spiritual and environmental dimensions as well as biological and economic.
Faustmann, M. 1995. Calculation of the value which forest land and immature stands possess for forestry. Journal of Forest Economics 1:7–44.
The classical and earliest rendition of economics as applied to forest management that correctly calculated the economically optimum age at which a forest should be harvested. This provided the foundation for much of the subsequent development of the economics of forest management.
Gould, D. M. 1964. The future of forests in society. n.p.
Locates the origins of the sustainable yield idea in feudal Germany.
Heske, Franz. 1938. German forestry. New Haven, CT: Yale Univ. Press.
Discussed German forestry, its development, and its implications for forest management.
Lee, R. G. 1982. The classic sustainable yield concept: Content and philosophical origins. In Proceedings, sustainable yield. Edited by D. LeMaster, D. Baumgartner, and D. Adams, 1–10, Cooperative Extension. Pullman: Washington State Univ.
Discusses the early philosophical aspects of sustainable yield forestry, especially as found in Germany.
Ohlin, B. 1995. Concerning the question of the rotation period in forestry. Journal of forest Economics 1:89–114.
This paper largely confirms the correctness of the earlier Faustmann paper. Article first published in Ekonomisk Tidskrift 22 (1921).
Samuelson, P. A. 1976. Economics of forestry in an evolving society. Economic Inquiry 14:466–492.
Provides a relatively recent examination of the biological and economic aspects of the question of the optimal forest harvest rotation and was commissioned in part to bring a famous Nobel Laureate economist to address forestry, largely to try and resolve ongoing dispute between biologists and economists regarding the optimal harvest rotation. Note that the differences in rotation length are resolved when the discount rate equals zero.
Society of American Foresters (SAF). 1958. Forest terminology. Washington, DC: SAF.
Defines sustainable yield in terms of the relation between growth and harvest.
Sohngen, B., R. Mendelsohn, and R. Sedjo. 1999. Forest management, conservation, and global timber markets. American Journal of Agricultural Economics 81.1: 1–13.
Using modeling techniques, this article examines sustainability for a forest system that consists of multiple forest locations and landscapes. In the extreme this might involve an entire country or even the global forest system, which is examined in this paper.
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