Forestry economics: Historical background and current issues

Abstract

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.