Principles and procedures in the economic analysis of stand treatments for timber production

The objective of this study was to develop refined procedures for the economic analysis of stand treatments for timber production.
This objective has been achieved by a review and explicit statement of the economic principles relevant to the analysis of stand treatments. Based on these principles, procedures for the analysis of silvicultural investments are proposed and demonstrated.
The review of economic principles indicated that the appropriate class of criteria for the analysis of stand treatments are expected Present Certainty Equivalent Value. However, these criteria were also shown to be incomplete due to the failure of the Separation Theorem to hold under imperfect markets. This incompleteness and the theoretical requirement that the quantity and price of inputs and outputs, of investment ensembles, be measurable limits these criteria to defining efficient investment emsembles. Although these criteria were found to be incomplete, they do provide a means of organizing the measurable information associated with alternative stand treatments in a way that contributes to the selection of an optimum combination. The review also points out the necessity of correctly identifying the opportunities for productive transformation in the analysis of investments. In addition, the requirement to estimate real prices, which define exchange opportunities in a manner consistent with the concepts of intertemporal choice is identified.
The maximization of expected Present Certainty-Equivalent Value of wealth gain is proposed as the rule and criterion for the economic analysis of stand treatments. The elements of the analysis procedure relating to (1) the level of analysis, (2) its duration, (3) the interval within the analysis period, and (4) treatment possibilities considered are discussed and a standard for each proposed. In addition, the requirements for estimates and measurements of the quantity and price of inputs and outputs are discussed. Standards for these estimates and measurements are identified in three categories; the requirements for the calculation of expected Present Certainty-Equivalent Value of wealth gain, the timber management requirement, and the measurement requirements.
The procedures for the analysis of stand treatments are demonstrated for a hypothetical compartment of Douglas-fir (Pseudotsuga menziesii (Mirb.) Franco) in western Washington. The treatments considered in the analysis include thinning, fertilization, and regeneration.
The conclusion of the study is that the procedures proposed and demonstrated are feasible and practical under current conditions. Further, the information resulting from these analyses will contribute to a more efficient allocation of resources in timber production.
Additional study of the economic theory of investment choice is recommended with particular attention being concentrated on the theory of exchange in imperfect markets, and the role of information in the selection of uncertain alternatives. However, the major opportunity for additional study is in the collection of information and the development of estimation techniques required to forecast the quantity and price of inputs and outputs associated with investments in timber production.

Advisor: Wright, H