Forestry Economics: Historical Background and Current Issues

  • Ronald Raunikar
  • Joseph Buongiorno
Part of the International Series In Operations Research amp; Mana book series (ISOR, volume 99)

The Faustmann model embodies the application of fundamental economic principles to the choice of management methods and alternative land uses. The price of products is a key input in applications of this principle. For wood prices, forest sector models provide a link between forestry and the rest of the economy, and thus a means to predict wood prices consistent with expected demographic and economic growth. To include the price of non-wood forest outputs, Faustmann’s principle needs to be expanded with modern benefit-cost analysis. Evaluation of forest amenities in the absence of markets poses conceptual challenges and requires special analytical techniques of contingent valuation. New concepts such as the environmental Kuznets curve and the Porter hypothesis provide the means to forecast future demand for forest amenities and better analyze the consequences of public policy choices.


Forest Owner Markov Decision Process Historical Background Environmental Kuznets Curve Private Forest 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Adams D.M., Alig R.J., McCarl B.A., Callaway J.M., Winnett S.M. An analysis of the impacts of public timber harvest policies on private forest management in the United States. Forest Science, 19, 1996, 343-358.Google Scholar
  2. Alpay E., Buccola S., Kerkvliet J. Productivity growth and environmental regulation in Mexican and U.S. food manufacturing. American Journal of Agricultural Economics, 84 (4), 2002, 887-901.CrossRefGoogle Scholar
  3. Ambec S., Barla P. A theoretical foundation of the Porter hypothesis. Economics Letters, 75(3), 2002, 355-360.CrossRefGoogle Scholar
  4. Andreoni J., Levinson A. The simple analytics of the environmental Kuznets curve. Journal of Public Economics, 80(2), 2001, 269-286.CrossRefGoogle Scholar
  5. Barbier E.B., Burgess J.C. The economics of tropical deforestation. Journal of Economic Surveys, 15(3), 2001, 413-433.CrossRefGoogle Scholar
  6. Bergstrom T., Blume L., Varian H. On the private provision of public goods. Journal of Public Economics, 29(1), 1986, 25-49.CrossRefGoogle Scholar
  7. Bhattarai M., Hammig M. Institutions and the environmental Kuznets curve for deforestation: a crosscountry analysis for Latin America, Africa and Asia. World Development 29(6), 2001, 95-1010.CrossRefGoogle Scholar
  8. Bhattarai M., Hammig M. Governance, economic policy, and the environmental Kuznets curve for natural tropical forests. Environment and Development Economics, 9(3), 2004, 367-382.CrossRefGoogle Scholar
  9. Bourassa S.C., Hoesli M., Sun J. What's in a view? Environment and Planning A, 36(8), 2004, 1427-1450.CrossRefGoogle Scholar
  10. Boyle K.J., Bergstrom J.C. Doubt, doubts, doubters: the genesis of a new research agenda? Chapter 7 of Valuing Environmental Preferences. Bateman I.J., Willis K.G., editors. Oxford University Press, 1999, p. 645.Google Scholar
  11. Braden J.B., Kolstad C.D., Miltz D. Introduction. Chapter 1 of Measuring the Demand for Environmental Quality. Braden J.B., Kolstad C.D., editors. North-Holland, New York, 1991, p. 370.Google Scholar
  12. Broome J. Discounting the future. Philosophy and Public Affairs, 23(2), 1993, 128-156.CrossRefGoogle Scholar
  13. Buongiorno J. Analyse econometrique du secteur forestier: un bilan de l’experience americaine. Cahiers d’economie et sociologie rurales, 15-16, 1990, 146-166.Google Scholar
  14. Buongiorno J. Forest sector modeling: a synthesis of econometrics, mathematical pro-gramming, and system dynamics methods. International Journal of Forecasting, 12, 1996. 329-343.CrossRefGoogle Scholar
  15. Buongiorno J. Generalization of Faustmann's formula for stochastic forest growth and prices with Markov chain decision process models. Forest Science, 47(1), 2001, 466-474.Google Scholar
  16. Buongiorno J., Zhu S., Zhang D., Turner J., Tomberlin D. The Global Forest Products Model: Structure, Estimation, and Applications. Academic Press, New York, 2003, p. 301.Google Scholar
  17. Cashore B., Vertinsky I. Policy networks and firm behaviours: governance systems and firm responses to external demands for sustainable forest management. Policy Sciences, 33(1), 2000, 1-30.CrossRefGoogle Scholar
  18. Chang S.J. Comment on Oderwald and Duerr (1990). Forest Science 36(1), 1990, 177-179.Google Scholar
  19. Chavas J.-P. On impatience, economic growth and the environmental Kuznets curve: a dynamic analysis of resource management. Environmental and Resource Economics, 28 (2), 2004, 123-152.CrossRefGoogle Scholar
  20. Coase R.H. The problem of social cost. The Journal of Law and Economics, 3, 1960, 1-44.CrossRefGoogle Scholar
  21. Columbia University School of International and Public Affairs. Access to Genetic Resources: An Evaluation of the Development and Implementation of Recent Regulation and Access Agreements. Columbia University School of International and Public Affairs, Environmental Policy Studies, Working Paper #4, 1999.Google Scholar
  22. Commons J.R. Institutional Economics; Its Place in Political Economy. The Macmillan Company, New York, 1934, p. 921.Google Scholar
  23. Copeland B.R., Taylor M.S. North-South trade and the environment. Quarterly Journal of Economics, 109(3), 1994, 755-787.CrossRefGoogle Scholar
  24. Crocker T.D. On the value of the condition of a forest stock. Land Economics, 61(3), 1985, 244-254.CrossRefGoogle Scholar
  25. Cropper C., Griffiths M. The interaction of population growth and environmental quality. American Economic Review, 84, 1994, 1358-1393.Google Scholar
  26. De Groot H.L.F., Withagen C.A., Minliang Z. Dynamics of China's regional development and pollution: an investigation into the environmental Kuznets curve. Environment and Development Economics, 9(4), 2004, 507-537.Google Scholar
  27. de Vries F.P., Withagen C. Innovation and Environmental Stringency: The Case of Sulfur Dioxide Abatement. Tilburg University, Center for Economic Research, Discussion Paper 18, 2005.Google Scholar
  28. Donovan G.H., Nicholls D.L. Estimating Consumer Willingness to Pay a Price Premium for Alaska Secondary Wood Products. Research paper PNW-RP-553. USDA Forest Service, 2003.Google Scholar
  29. Ehrhardt-Martinez K., Crenshaw E.M., Jenkins J.C. Deforestation and the environmental Kuznets curve: a cross-national investigation of intervening mechanisms. Social Science Quarterly, 83(1), 2002, 226-243.CrossRefGoogle Scholar
  30. Faustmann M. Calculation of the value which forest land and immature forest stands possess for forestry. Allgemaine forst-un jagd-zeitung, 15, 1849, 441-455.Google Scholar
  31. Fisher A.C., Krutilla J.V. Resource conservation, environmental preservation and the rate of discount. Quarterly Journal of Economics, August 1975, 358-370.Google Scholar
  32. Fix P., Loomis J. Comparing the economic value of mountain biking estimated using revealed and stated preference. Journal of Environmental Planning and Management, 41(2), 1998, 227-236.CrossRefGoogle Scholar
  33. Gawande K., Bohara A.K., Berrens R.P., Wang P. A consumption-based theory of the environmental Kuznets curve. Ecological Economics, 37, 2001, 101-112.CrossRefGoogle Scholar
  34. Gleeson B. Manufacturing Industry Pollution and Community Characteristics. Ph.D. Dissertation, University of Wisconsin, Madison, 2004.Google Scholar
  35. Grossman G.M., Krueger A.B. Environmental Impacts of a North American Free Trade Agreement. Discussion papers in economics/Woodrow Wilson School, Princeton University, vol. 158, 1992, pp. 1-39.Google Scholar
  36. Hanley N., Ruffell R. The Valuation of Forest Characteristics. Queen's Institute for Economic Research, Discussion Paper: 849, 1992, p. 45.Google Scholar
  37. Harou P.A. On a social discount rate for forestry. Canadian Journal of Forest Research, 15(5), 1985, 927-934.CrossRefGoogle Scholar
  38. Hartman R. The harvesting decision when a standing forest has value. Economic Inquiry, 14, 1976, 52-58.CrossRefGoogle Scholar
  39. Hesseln H., Loomis J.B., Gonzalez-Caban A. Comparing the economic effects of fire on hiking demand in Montana and Colorado. Journal of Forest Economics, 10(1), 2004, 21-35.CrossRefGoogle Scholar
  40. Hool J.N. A dynamic programming-Markov chain approach to forest production control. Forest Science Monograph, 12, 1966, 1-26.Google Scholar
  41. Horbach J. Employment and Innovations in the Environmental Sector: Determinants and Econometrical Results for Germany. Fondazione Eni Enrico Mattei, Working Papers: 2003.47, 2003.Google Scholar
  42. Jones L., Manuelli R. Endogenous policy choice: the case of pollution and growth. Review of Economic Dynamics, 4(2), 2001, 369-405.CrossRefGoogle Scholar
  43. Kaya I., Buongiorno J. Economic harvesting of even-aged northern hardwood stands under risk: a Markovian decision model. Forest Science, 33(4), 1987, 889-907.Google Scholar
  44. Keeler E., Spence M., Zeckhauser R. The optimal control of pollution. Journal of Economic Theory, 4, 1972, 19-34.CrossRefGoogle Scholar
  45. Kelly K.J., Mbaria J. YES, WE GOT SPECIMENS FROM KENYA - GENENCOR. Global News Wire - Asia Africa Intelligence Wire, September 6, 2004.Google Scholar
  46. Koop G., Tole L. Is there an environmental Kuznets curve for deforestation? Journal of Development Economics, 58(1), 1999, 231-244.CrossRefGoogle Scholar
  47. Kuznets S. Economic growth and income inequality. American Economic Review, 45, 1955, 1-28.Google Scholar
  48. Lantz V. Is there an environmental Kuznets curve for clearcutting in Canadian forests? Journal of Forest Economics, 8, 2002, 199-212.CrossRefGoogle Scholar
  49. Lee K.J. Hedonic Estimation of Nonindustrial Private Forest Landowner Amenity Values. Unpublished Ph.D. Dissertation, North Carolina State University, 1997.Google Scholar
  50. Lembersky M.R., Johnson K.N. Optimal policies for managed stands: an infinite horizon Markov decision process approach. Forest Science, 21(2), 1975, 109-122.Google Scholar
  51. Leslie A. A second look at the economics of natural management systems in tropical mixed forests. Unasylva, 39(1), 1987, 46-58.Google Scholar
  52. Li M.M., Brown H.J. Micro-neighborhood externalities and hedonic housing prices. Land Economics, 56(2), 1980, 125-140.CrossRefGoogle Scholar
  53. Lin C.R., Buongiorno J. Tree diversity, landscape diversity, and economics of maple-birch forests: implications of Markovian models. Management Science, 44(10), 1998, 1351-1366.CrossRefGoogle Scholar
  54. Lindmark M. Patterns of historical CO2 intensity transitions among high and low-income countries. Explorations in Economic History, 41(4), 2004, 426-47.CrossRefGoogle Scholar
  55. Mattson L., Li C. The non-timber value of Northern Swedish forests. Scandinavian Journal of Forest Research, 8, 1993, 426-434.CrossRefGoogle Scholar
  56. Marklund, P.-O. Environmental Regulation and Firm Efficiency: Studying the Porter Hypothesis using a Directional Output Distance Function. Umeå Economic Studies, Working Paper no. 619, 2003.Google Scholar
  57. Martinez-Zarzoso I., Bengochea-Morancho A. Pooled mean group estimation of an environmental Kuznets curve for CO2. Economics Letters, 82(1), 2004, 121-126.CrossRefGoogle Scholar
  58. Nguyen Van P., Azomahou T. Deforestation croisance economique et population: Une etude sur donnees de panel (Deforestation, economic growth, and population: a panel data study). Revue Economique, vol. 54, no 4, 2003, pp. 835-855.CrossRefGoogle Scholar
  59. Norberg-Bohm V., Rossi M. The power of incrementalism: environmental regulation and technological change in pulp and paper bleaching in the US. Technology Analysis & Strategic Management, 10(2), 1998, 225-245.CrossRefGoogle Scholar
  60. Oderwald R.G., Duerr W.A. Koning-Faustmann: a critique. Forest Science, 36(1), 1990, 169-174.Google Scholar
  61. Panayotou T. Empirical Tests and Policy Analysis of Environmental Degradation at Different Stages of Economic Development. Working Paper WP238, Technology and Employment Programme (Geneva: International Labor Office), 1993.Google Scholar
  62. Partridge E. In search of sustainable values. The International Journal of Sustainable Development, 6(1), 2003, 25-41.CrossRefGoogle Scholar
  63. Pease P.H., Holmes T.P. Accounting for nonmarket benefits in southern forest management. Southern Journal of Applied Forestry, 17(2), 1993, 84-89.Google Scholar
  64. Perry D.A., Maghembe J. Ecosystem concepts and current trends in forest management: time for reappraisal. Forest Ecology and Management, 26, 1989, 123-140.CrossRefGoogle Scholar
  65. Porter M.E. America's green strategy. Scientific American, 264(4), 1991, 168.Google Scholar
  66. Raunikar R.P., Buongiorno J. 2006 Willingness to pay for forest amenities: the case of non-industrial owners in the south central United States. Ecological Economics. 56(1): 132-143.CrossRefGoogle Scholar
  67. Raunikar R.P., Buongiorno J. 2006 (Section 9) Environmental quality and economic growth: Some evidence from forested landscapes in the Southern United States. Department of Forest Ecology and Management, University of Wisconsin, Madison.Google Scholar
  68. Rodriguez-Meza J., Southgate D., Gonzalez-Vega C. Rural poverty, household responses to shocks, and agricultural land use: panel results for El Salvador. Environment and Development Economics, 9(2), 2004, 225-239.CrossRefGoogle Scholar
  69. Roediger-Schluga T. Some micro-evidence on the “Porter hypothesis” from Austrian VOC emission standards. Growth and Change, 34(3), 2003, 359-379.CrossRefGoogle Scholar
  70. Roediger-Schluga T. The Porter hypothesis and the economic consequences of environmental regulation: a neo-Schumpeterian approach. Elgar, Cheltenham, U.K. and Northampton, Mass., 2004, pp. xi, 349.Google Scholar
  71. Rollin F., Buongiorno J., Zhou M., Peyron J.-L. Management of mixed-species, uneven-aged forests in the French Jura: from stochastic growth and price models to decision tables. Forest Science, 51(1), 2005, 64-75.Google Scholar
  72. Roos A. The price for forest land on combined forest estates. Scandinavian Journal of Forest Research, 10, 1995, 204-208.CrossRefGoogle Scholar
  73. Rothman D.S. Environmental Kuznets curves—real progress or passing the buck? A case for consumption-based approaches. Ecological Economics, 25(2), 1998, 177-194.CrossRefGoogle Scholar
  74. Rupasingha A., Goetz S.J., Debertin D.L., Pagoulatos A. The environmental Kuznets curve for US counties: a spatial econometric analysis with extensions, Papers in Regional Science, vol. 83 no 2, 2004, pp. 407-424.CrossRefGoogle Scholar
  75. Samuels W.J. Legal-economic Nexus. The George Washington Law Review, 57, 1989, 1556-1578.Google Scholar
  76. Samuelson P.A. Economics of forestry in an evolving society. Economic Inquiry, 14, 1976, 466-491.CrossRefGoogle Scholar
  77. Scarpa R., Buongiorno J., Hseu J.S., Lee Abt K.J. Assessing the non-timber value of forests: a revealed-preference, Hedonic model. Journal of Forest Economics, 6(2), 2000, 83-108.Google Scholar
  78. Scarpa R., Thiene M. Destination Choice Models for Rock Climbing in the Northeast Alps: A Latent-Class Approach Based on Intensity of Participation. Fondazione Eni Enrico Mattei, Working Papers: 2004.131, 2004.Google Scholar
  79. Scorgie M., Kennedy J. Who discovered the Faustmann condition? History of Political Economy, 28(1), 1996, 77-80.CrossRefGoogle Scholar
  80. Shafik N., Bandyopadhyay S. Economic Growth and Environmental Quality: Time Series and Cross-country Evidence. Background Paper for the World Development Report 1992 (Washington D.C.: The World Bank), 1992.Google Scholar
  81. Skonhoft A., Solem H. Economic growth and land-use changes: the declining amount of wilderness land in Norway. Ecological Economy, 37, 2001, 289-301.CrossRefGoogle Scholar
  82. Stern D.I., Common M.S., Barbier E.B. Economic growth and environmental degradation: the environmental Kuznets curve and sustainable development. World Development 24(7), 1996, 1151-1160.CrossRefGoogle Scholar
  83. Stokey N.L. Are there limits to growth? International Economic Review, 39(1), 1998, 1-31.CrossRefGoogle Scholar
  84. Strang W.J. On the optimal forest harvesting decision. Economic Inquiry, 21, 1983, 576-583.CrossRefGoogle Scholar
  85. Taylor C.R. Stochastic dynamic duality: theory and empirical, applicability. American Journal of Agricultural Economics, 66(3), 1984, 352-357.CrossRefGoogle Scholar
  86. ten Kate K., Touche L., Collis A. Benefit-Sharing Case Study: Yellowstone National Park and the Diversa Corporation. Report to the Executive Secretary of the Convention on Biological Diversity, 1998.Google Scholar
  87. Turner J. Trade Liberalization and Forest Resources: A Global Modeling Approach. Ph.D. Dissertation, University of Wisconsin, Madison, 2004.Google Scholar
  88. Turner R., Newton C.M., Dennis D.F. Economic relationships between parcel characteristics and price in the market for Vermont forestland. Forest Science, 37(4), 1991, 1150-1162.Google Scholar
  89. Von Mises L.E. Human Action: A Treatise on Economics. Yale University Press, New Haven, 1949, p. 889.Google Scholar
  90. Weitzman M.L. Why the far-distant future should be discounted at its lowest possible rate. Journal of Environmental Economics and Management, 36, 1998, 201-208.CrossRefGoogle Scholar
  91. Weitzman M.L. Gamma discounting. American Economic Review, 91(1), 2001, 260-271.CrossRefGoogle Scholar
  92. Winters, R.K. The Forest and Man. Vantage Press, New York, 1974, p. 393.Google Scholar
  93. Xu W., Lippke B.R., Perez-Garcia J. Valuing biodiversity, aesthetics, and job losses associated with ecosystem management using stated preferences. Forest Science, 49(2), 2003, 247-257.Google Scholar
  94. Zhu S., Tomberlin D., Buongiorno J. Global Forest Products Consumption, Production, Trade and Prices: Global Forest Products Model Projections to 2010. Working paper GFPOS/WP/01. Forest Policy and Planning Division, FAO, Rome, 1998.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  • Ronald Raunikar
    • 1
  • Joseph Buongiorno
    • 1
  1. 1.Department of Forest Ecology and ManagementUniversity of WisconsinMadisonUSA

Personalised recommendations