Open AccessFAUSTMANN'S FORMULAS FOR FORESTS
Author(s) -
CAIRNS ROBERT D.
Publication year - 2017
Publication title -
natural resource modeling
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.28
H-Index - 32
eISSN - 1939-7445
pISSN - 0890-8575
DOI - 10.1111/nrm.12105
Subject(s) - asset (computer security) , investment (military) , natural capital , capital (architecture) , conjunction (astronomy) , natural resource economics , economics , resource (disambiguation) , business , microeconomics , environmental resource management , ecology , geography , ecosystem services , computer science , ecosystem , computer network , physics , computer security , archaeology , astronomy , politics , political science , law , biology
The canonical, Faustmannian forest is revisited to sharpen understanding of forests as forms of irreversibly invested capital. Investment and two r‐percent rules are discussed and re‐interpreted. A forest's two natural resources, the stand and the land, act in conjunction as a composite, sunk asset. All returns are attributed to the composite. Nonmarketed or intangible capital is also absorbed into the composite. If capital is comprehensively defined, there is no independent role for the concept of an internal rate of return. A forest provides real options in optimal and suboptimal rotation patterns. Old growth has superficial similarities to an exhaustible resource, but the forest still consists of two resources that, in conjunction, behave comparably to a plantation forest. Nonconvexities inherent in the benefits and costs of forest use indicate that implementing a sustainable program may be very difficult.