1. Forest Resources
Monday, April 4

2. Characteristics of a Forest Resource
Renewable
Slow growth
Replant
Self-regenerate
Life cycle
External benefits
Storable

3. Forestry Property Rights
For private land owner, right to cut trees is one of the sticks in the bundle of rights
Publicly owned forest land
Federal and state (20% of land area – 7.5 million acres)
Federal and state programs of multiple use
Private harvest on public land

4. Biological Model Total volume of wood by age of forest Years
Volume of wood (cu ft)
Years

5. Age of trees
Volume
Average Volume
Annual Increase 10 80 8 20
200 12 30
400
13.3 40
720 18 32 50
1360
27.2 44 60
1660
26.3 70
1840
24.5
1960
22.7 90
2040
20.9
100
2090 19 5
110
17.4
120
14.9

6. Harvesting Decision Rules
Biological
When average volume is at maximum
Economic
When marginal benefit of one more year just equals the marginal cost of one more year.

7. Using Field’s Notation:
V0: value of the wood that would result if harvested this year (p x q0).
V1: value of the wood that would result if harvest is delayed one year (p x q1).
ΔV: V1- V0 or the change in value between the two years (what you lose if you cut in year 0)
C: cost of harvest (c x q)
r: discount rate
S: PV of all future net benefits (all future timber harvests with efficient management or other known uses)

8. (MC = MB) Proceeds if harvested this year
(Marginal benefit of harvesting now)
Proceeds if harvested next year
(Marginal cost of harvesting now)
(MC = MB)

9. The Simple Model

10. For simple model (no future), changing harvest costs does not change optimal time of harvest:
Present value of net value, r=.02, when harvest costs are .30/cu ft, .40/cu ft, and .50/cu ft.