The Optimal Forest Rotation: Some Economic Dimensions
Timber is unique among natural resources in that its price show a long-term increasing trend relative to the price of other goods (Ruttan and Callahan 1962; Manthy 1978). Adams and Haynes (1980), in the best known forest econometric model, project this trend to continue. One explanation for this secular rise in price relates to the virtual mining of the standing stock of old growth (mature) timber and its positive effect on real stumpage prices. Hotelling’s (1931) theory of the mine postulates that as a stock of nonrenewable resources is depleted, its price rises at the rate of interest. However, Lyon (1981), using a model that includes forest regeneration of the cutover land, finds that the rate of price increase is less than the real rate of interest as the new growth moderates the price change. Since substantial old growth volume still remains to be harvested, the projections of continuing moderate price increases in the future are reasonable.
Bhattacharyya, R.N., D.L. Snyder, and B. Biswas. The Optimal Forest Rotation: Some Economic Dimensions. Economic Affairs 33(1, March 1988):17-29.