Current issue: 58(4)
The paper elaborates upon various theories to explain economic development and restructuring in the forested regions of advanced countries. The concepts of communities based on the forest sector and the concept of restructuring are discussed before presenting the diversity of relevant theories. Different theoretical approaches in geography and regional and socio-economic sciences are analysed, and the paper concludes that each theory gives only a partial explanation of restructuring under certain conditions. This paper recommends that an explanatory framework should take into account – in addition to general explanatory factors – sectoral, local-specific and policy-related factors and the role of human agency in attempts to explain restructuring and development.
The profitability of forestry in the context of recent economic developments in Finland suggest a more systematic analysis of the profit and the cost structure of small-scale forestry than is normally made today. The domestic and international pressure on farming emphasizes the development of rural areas by means of other business than agriculture, in practice this may mean forestry. Financing in terms of the new law concerning agriculture requires projects to be profitable. Thus, the profitability of different lines of production, including forestry, needs to be reported more carefully than is the practice today.
A network of forestry bookkeeping farms covering the whole Austria has existed for 20 years. The organization and the operation of the forestry bookkeeping and the cost accounting system is based on the scientific cooperation and exchange of information between the organizations in charge. The practical experience and recommendations based thereon might be useful for Finland, when implementing a country-wide network of forestry bookkeeping and cost accounting.
The PDF includes an abstract in English.
This paper is a review on the development of sustainable forest management and what has been meant with the term in different times. The article summarises the birth of sustainable use of forests in the world and in Finland, and discusses sustainability in forest management, for instance from the point of view of one forest holding, large clearcuttings performed in Lapland, biological sustainability, business economics and overall planning.
The two introductory books written by emeritus professor William Duerr provide an opportunity to scope the research progress in the forest economic discipline during almost a quarter century. This paper gives a presentation of the books (Fundamentals of Forest economics, 1960, and Forestry Economics as Problem Solving, 1984), and the development of forest economics during the period.
The PDF includes a summary in English.
The economic analysis is based on computer simulations which covered a seedling rotation and three successive coppice rotations. Calculations were carried out for the four site productivity classes in Eucalyptus globulus plantations. The rotation length that maximized the land expectation value is 12–20 years for seedling rotation and 8–16 years for coppice rotations with discounting rates 2–8%. The mean wood production is over 40 m3/ha/a in the best site class and about 10 m3/ha/a in the poorest class with rotation lengths ranging from 10 to over 20 years. Thinnings increase the wood production and land expectation value by a few percentage points. In areas suitable to Eucalyptus globulus growth, the land expectation value is considerably higher in forestry than in agriculture, except in very poor areas or with very high rate of interest.
The PDF includes an abstract in Finnish.
Standard methods of welfare economics are used in a market simulating framework to evaluate policy measures designed to increase future timber supplies. Forest management cost-share programs are examined using this methodology. The differential regional impact of cost-share payments is considered, as is the distribution of these benefits between stumpage producers (owners of forest land) and stumpage consumers (producers of forest products). Previous estimates of the welfare gains that would result from a higher level of forest management cost-share payments in the southern United States are revised to account for the loss of public revenue resulting from lower future prices. A methodology for comparing alternative policy instruments is discussed, and a preliminary, qualitative comparison is made between the use of cost-share payments and alternative policy measures.
To conduct an efficient forest policy, both a normative and a positive theory are necessary. In addition, however, the explicit intertemporal considerations in natural resource economics demand that it is made crystal clear which means are permanent and which are non-permanent. The permanent case is far from easy to solve.
That the theoretical problems have practical relevance is shown by Swedish experience. A practical course of action is to weight possible positive effects from a permanent subsidy against possible deleterious outcomes. It is also desirable to avoid jerkiness in forest policy, which is likely to create uncertainty about the permanence of permanent means.
Law may sometimes be more efficient in creating ”credibility” than economic incentives. Regeneration has been mandatory in Sweden since 1903, and nobody refrains from cutting because he believes that regeneration duty will be abolished in some near future.
Development of timber sale accounting system for the U.S. Department of Agriculture, Forest Service ordered by the U.S. Congress, has entailed numerous evaluations and research projects. Critics of the current process claims administrative costs are not recovered by the prices paid for Federal timber. However, management of multiple resources for multiple uses makes traditional accounting difficult; i.e., keeping track of cash flows. A further complication involves allocating costs to the various resources (joint cost allocation), for which no nonarbitrary method currently exists. A concurrent issue involves the building of roads for timber harvest into areas released from wilderness consideration. Environmentalists see the road building program of the Federal land management agencies as an additional reason Federal management costs are not recovered from timber-generated revenues. The heart of the issue is which lands are economically suited for timber management, and what nonmarket benefits and costs accrue from the timber management.
The purpose of this paper is to present an approach to evaluate the profitableness of a forest policy program and to discover from among the feasible programs the one that best complies with the desired performance of the economy. At first the procedures of forest policy-making in a country like Finland is considered. After that a method to evaluate forest policy programs is derived.
The paper discusses the evaluation of timber production policies with different income (timber drain) schedules. Special attention is given to the temporal smoothness of the income flow. A utility model is formulated in which the objective is to maximize a fixed consumption pattern, and money can be saved and borrowed at different interest rates. We thus have smoothness requirements only for consumption, the capital market then determines the smoothness of the optimal income flow. Present discounted value and maximization of even income flow criteria are special cases of the utility model. Consumption can be maximized by linear programming. A sample problem is presented.
The PDF includes a summary in Finnish.
In forestry, a classical method of evaluating the profitability of an outlay is to calculate the internal rate of return. If there are many outlays and returns over a period, analytical determination of the internal rate is difficult and requires simulation methods. However, if there is only one outlay and one return, the computation is easy. In this paper, some formulae were developed for practical purposes. The equations also show how the return changes as the ratio between the return and the outlay changes.
The PDF includes a summary in English.
The article deals with differences in economic growth in different countries and regions and with reasons for these differences. The central role in investments in economic growth and the mechanism of its differentiation are elucidated. The properties of forestry and the forest industries in equation or differentiating economic growth are considered. In the light of the theories of regional differentiation, the mere production of raw material in some region tends to increase differences in economic development if that raw material is processed in some other region – despite the fact that the level of income rises in both regions. It is therefore desirable that afforestation projects in the development countries are accompanied by the development of the forest industries.
The PDF includes a summary in Finnish.
The paper reviews the past research in the five major subfields of business economics of forestry. Although the twelve doctoral dissertations in the discipline distribute evenly among the subfields, timber production economics has gained the major weight during the past 10–20 years. The new forest products market development requires the focus be shifted from pulpwood to high quality sawn timber production. Maintaining the current market share requires effective measures to control the wood costs. The article proposes nine research projects relating to these market demands.
The PDF includes a summary in Finnish.
This paper analyses the potential of utilizing a previously existing infrastructure of small sawmills in a backward area to enhance planned social development, considering at the same time both social and economic objectives. The paper presents the case of a rural forest region of 352,000 ha in Southern Chile in the period 1970–73. It is concluded that meaningful contributions can be made by this traditional industry to such development.
The PDF includes a summary in Finnish.
The development of a society often involves deep-going changes in its economic and social structure. According to the theory of cumulative growth, the economic changes attached to industrialization and modernisation of a society are characterized by the regional differentiation of economic activities. Expansive growth centres, areas with spreading effects, and back-wash areas will develop due to the dynamic forces of cumulative development.
The impact of industrialization and modernization on society as a whole usually manifests itself in an achievement of many of the welfare objectives considered desirable. There are, however, differences between the industries or other economic activities in respect to their effect on the economic or social life of a society or a region. The special feature of forestry and forest industry is that they are more concerned with rural districts than most other economic pursuits. The differentiation effect of forestry and forest industries is not as pronounced as that of certain other industries. Especially the back-wash effects remain rather weak.
In traditional, non-industrialized society the establishment of forestry activities may have an important role in the beginning of economic and social development which is rational from the point of view of the local communities as well as of the society as a whole. However, forestry may also have influences which one can see as socially undesirable. As far as traditional rural societies are concerned, one basic problem is that the establishment of forestry activities may advance the disintegration of ancient social institutions and structures. On the other hand, in a modern, industrialized society one primary function of forestry seems to be to maintain and strengthen the rural social structures and to equalize the regional differences caused by cumulative development. However, the role of forestry in rural development is likely to decrease when the industrialization and modernization progresses, for instance, because the increasing urban population will use forests for purposes other than forestry, such as recreation and nature conservation.
The PDF includes a summary in Finnish.
The object of the study was to give a tentative indication of the realized economic significance of the principal forest (forestry land) uses in Finnish Lapland. Data concerns the years of the 1970s. Nowadays timber harvesting generates a major part of the total value of production. Recreation (tourism) is in second place. Reindeer husbandry, collection of berries and mushrooms and hunting together produce, in the best years, an output value which is about one fifth of that of timber harvesting. Non-timber uses together produce a rather significant portion on the total value of the integrated forestry output.
The PDF includes a summary in Finnish.
A growing stand of Norway spruce (Picea abies (L.) H. Karst.) marked for cutting was investigated in the winter of 1971–72 in Helsinki in Southern Finland in order to determine the economic loss caused by decay. Taking a sample from growing spruce trees with increment borer is not a reliable method of determining the frequency of decay. The decayed stems were twice measured for assortment cutting into lengths; the first time disregarding the decay and the second time doing the actual assortment cutting according to the grade of timber. The direct economic loss caused by decay was 13% of the price for standing timber. The indirect loss may be as great as the direct loss.
The PDF includes a summary in English.
The article is based on studies made in the Karelian isthmus in 1936-1938 before the World War II broke in 1939. Further studies were not possible after the war when the area was handed over to Soviet Union. Economic data of agriculture and forestry of the farms had mostly been regarded separately in the early economic studies of small farms in Finland. This survey aimed at studying influence of forestry in the economy of a small farm. 141 farms were included in a more detailed survey.
Forestry accounted for in average 38% of total income of the farms in 1937-1938. The farms had sold wood often, the amounts being often small. Good transport connections in the area facilitated the sales. Over 70% were sales at delivered price, and about half of the wood was small-sized timber. According to the results of the survey, forestry was important for the small farms in Karelian isthmus. The farmers could not have made a living without the forests. Hoveter, the farms had had to overuse the forest resources. The wood resources decreased by 18-22% in 1922-1938. They were, however, at the same level as in average in Finland in 1938.
The article includes an abstract in German.
Silva Fennica issue 42 includes presentations held in professional development courses, arranged for foresters working in public administration in 1936. The presentations focus on practical issues in forest management and administration, especially in regional level. The education was arranged by Forest Service
This presentation describes national economy from the forestry point of view.
Tar was an important export article in Finland, then a part of Sweden, in the 18th century. For instance, in 1640 half of Finnish trade consisted of tar. In other countries, like Norway, Poland, Archangel in Russia, and North Sweden, burning of tar was minor compared to Finland. In Finland, tar was produced of young pine trees. Tar production concentrated in more remote locations of the country, where it would be too difficult and expensive to transport timber and wood products. The cheapest products, such as wood, boards and planks, were produced on a coastal zone at farthest 30 km from the coast. Tar was produced in the zone beyond the coastal district. The inland parts of Southern Finland were, however, hilly which made even the transport of tar difficult. Tar production ended by the middle of the 19th century when wooden ships were abandoned, and the value of forests and other wood products increased.
The PDF includes a summary in English.
The purpose of this study was to analyse economic models used in certain studies and to evaluate whether the economic theory envisaged by a model is consistent with its aims in forest policy. Second, the paper will point out assumed improvements for models that can be used as a basis for forest policy.
There are two types of economic models according to their purpose. One type, the marketing models, can be used for explaining or forecasting the consumer’s behaviour with no intension to affect the economies to be gained from the alternative patterns of behaviour explained. Others, the policy models, are meant to serve as guideposts which by means of normative forecasts point out the programme to be followed in order to attain certain aims. The majority of the policy models are static. The paper assesses the static models, and evaluates how well they fit their purpose. Special attention is given to dynamic economic models. A dynamic model can, at least in principle, be used to explain the course of events during the adjustment period required to achieve a production goal.
The PDF includes a summary in Finnish.
This article is a review of Finnish forest research in the field of forest economics in the previous 50 years. Forest economics in Finland is comparatively young as an independent field of forest research. Not until 1922 was the office of Professor of Forest Economics established in the University of Helsinki. The Department of Forest Economics was established within the Forest Research Institute in 1928. The article presents the main fields of investigation, namely Finland’s forest resources and forest balance, forest ownership policy, forest legislation and forest taxation, forest labour, forest geography, forest industries and wood transport, marketing of forest products, and business economics of forestry.
The article is published in Finnish in separate PDF Acta Forestalia Fennica vol 70 no 9.
This article is a review of Finnish forest research in the field of forest economics in the previous 50 years. Forest economics in Finland is comparatively young as an independent field of forest research. Not until 1922 was the office of Professor of Forest Economics established in the University of Helsinki. The Department of Forest Economics was established within the Forest Research Institute in 1928. The article presents the main fields of investigation, namely Finland’s forest resources and forest balance, forest ownership policy, forest legislation and forest taxation, forest labour, forest geography, forest industries and wood transport, marketing of forest products, and business economics of forestry.
The article is published in English in separate PDF Acta Forestalia Fennica vol 70 no 10.
The article summarises the career of Eino Saari, professor of forest economics at the University of Helsinki on his 60th anniversary. He is the founder of forest economics research in Finland, and has developed the theory of forest balance. He abandoned the traditional static view of the forest balance and developed a new dynamic conception.
The Acta Forestalia Fennica issue 61 was published in honour of professor Eino Saari’s 60th birthday.
The PDF includes a summary in English and Swedish.
Literature knows a variety of forest and timber related balances and even wider variety of calculations concerning the themes. The article presents forest and timber balances divided into three categories, based on their purpose.
The three categories are: 1) (national) economic balances for calculating the sustainability of forest use and sufficiency of forest resources; 2) balances of yearly harvesting rates for mostly commercial purposes, but also economic uses; and 3) balances of timber demand and those for balance between supply and demand, especially for foreign trade.
Finally the author critically views the use of balances to describe the amounts of wood used in industry.
The PDF contains a summary in Finnish.According to the theory of peatland types, particular peatland types, after sufficient drainage, change into certain forest types. It has been found, that the range of forest types in peatlands in different stages of draining is as large as on mineral soil; and comprise Cladina, Calluna, Vaccinium, Myrtillus Oxalis-myrtillus and grove types. Poor peatland types change into poor forest types, better for better types. However, a Swedish scientist Mellin suggested that after effective drainage especially oligotrophic bogs, when well drained, change usually into Myrtillus type.
The different conclusions are due to the fact that the same bog type may develop into different forest types according to the effectiveness and duration of the drainage. Greater the decay of the peat bog layer, the more exacting is the type of vegetation which appears. Bog types of classes V, IV and III (Finnish classification of site quality) change into a Myrtillus type, as do the poorer peatland types of class II. The types vary, however, in their economical drainage value. The fact that bogs which in their natural stage are clearly different in their site quality change after through drainage into the same forest type, is explained by the chemical quality of the peat. However, class I and the best types of class II bogs change into better forest types because they as eutropchic bogs are richer in nitrogen and lime. This difference persists despite of effective draining.
It has been shown that the development of eutrophic peatland types at the forest type stage also differs clearly from the development of oligotrophic peatland types. The Finnish classification of drainage value shows correctly the relative drainability when using normal spacing of ditches. The notes on forest types on mineral soil should, however, be replaced by corresponding notes on the transitive types between bog and forest types.
The PDF includes a summary in Swedish and English.
The article contains three parts and a summary. The first part presents the common foundations of forest economics and forest management. The second part critically discusses the concept of sustainability and the third part takes critical view on the theories on profitability.
The author concludes by stating that the literature shows there are some old principles of forest management that always arise when the forest science progresses. The economics of forest management has been neglected in the sense that it should be acknowledged as self and not as mathematical problem as it has been handled in many theories of national economy, e.g. land rent theory. The science seems the turn back to previous findings as they are proved right again.
The PDF contains a summary in German.
Studies by G. König are the main source for the profitability theories of forestry. He was one of the first economists developing the forestry practices more towards profitability aspects. His doctrine presented the first steps of current forest related trend of ideas and hence so significant in the later development of the discipline.
The article presents the life of G. König and two of his most important works: “Anleitung” (introduction) from the year 1813 and “Forstmathematik” (Mathematics of forest) from years 1835 and 1854
The PDF contains a summary in Finnish.
The article has two parts: the first are the common principles of forestry and forest economics and the second part presents different theories of forest economics. The aim of the study is to find out how the best possible economic result can be achieved from forest management and use of forest resources.
The first part presents the economic foundations of forestry; the division between following the concept of economic profitability in forestry and forest management; concepts of capital and operating result in forestry; and productivity and profitability. It discusses the idea of economy as a dynamic entity instead of static.
In the second part the different economic theories related to forestry and forest economics are presented. Theory on the highest interest on forest capital, theory of sustained yield management system, land rent theory, theory on forest profitability and dynamic economic theory are discussed.
The PDF contains a summary in Finnish.There are several competing theories about forestry: school on continuous forest management system, school on profitability of forestry and a dynamic view on economics. The article discusses the pros and cons of the different theories or viewpoints and wider the essence of forest as an economic asset.
To serve the needs of the practical forestry and the economics related to forests the forestry needs to seek for standardization in relation to growth potential of the forests and market orientation of the timber. A modern theory of forestry needs to base itself on both.
The volume 34 of Acta Forestalia Fennica is a jubileum publication of professor Aimo Kaarlo Cajander.
Natural regeneration has been studied so far mostly on the perspective of regeneration, while the production capacity of the seed crop stand has been of little interest in the earlier studies. This paper studied volume growth of the seed trees and the economic impact of this regeneration method both in a literature review and measuring sample stands consisting of Scots pine (Pinus sylvestris L.) and Norway spruce (Picea abies (L.) H. Karst.) dominated stands and mixed forests in Norway.
It is concluded that in the most cases the seed tree stands give better pulpwood and timber yield than the stands in the average. The reason might be that the elite stems can better use their production capacity, and, thus, reach bigger and more valuable dimensions. Even though the growing stock diminishes in the seeding felling, the growth of the stand does not decrease or decreases only little. At the same time, the quality growth improves. In addition, the new tree regeneration is achieved usually without extra costs, and there is no unproductive time period in the stand.
To achieve a continuous and constant timber flow over a longer time period, the forest holding structure should be close to normal forest or regulated forest. Concept of normal forest is presented as the model of achieving the highest possible sustainable yield and hence also the best economic return. The article discusses the regulations on the management of a forest holding with the view on regulating the forest yield.
Felling need to be planned according to the forest site and tree species. The main tree species for silvicultural purposes are pine, spruce and birch. After the widely used controlled burning of forests the state of Finnish forests is mostly weak and far from the “normal forest”. Majority of forests are of young and there are lots of broadleaved forests. Because of the great variation of the forest sites and their productivity as well as the small size of holdings in Finland, the selection of forest management regime, mainly the felling style (clear cut or light selection) is also important. The idea of management plans is represented.
The article is a presentation given by the author on occasion of visit from Austrian timber industry and foresters (August 17th 1923) in Punkaharju, Finland.
The article presents the classification of soils as forest types to describe their fertility and their occurrence in different parts of Finland. The economic conditions are only shortly mentioned: the more fertile areas in southern and western Finland have been taken for agriculture and the less fertile soils have stayed forested.
The study presents a theory of utility models based on aspiration levels, as well as the application of this theory to the planning of timber flow economics. The first part of the study comprises a derivation of the utility-theoretic basis for the application of aspiration levels. Two basic models are dealt with; the additive and the multiplicative. Applied here solely for partial utility functions, aspiration and reservation levels are interpreted as defining piecewisely linear functions. The standpoint of the choices of the decision-makers is emphasized by the use of indifference curves. The second part of the study introduces a model for the management of timber flows. The model is based on the assumption that the decision-maker is willing to specify a shape of income flow which is different from that of the capital-theoretic optimum. The utility model comprises four aspiration-based compound utility functions.
The theory and the flow model are tested numerically by computations covering three forest holdings. The results show that the additive model is sensitive even to slight changes in relative importance and aspiration levels. This applies particularly to nearly linear production possibility boundaries of monetary variables. The multiplicative model, on the other hand, is stable because it generates strictly convex indifference curves. Due to a higher marginal rate of substitution, the multiplicative model implies a stronger dependence on forest management than the additive function. For income trajectory optimization, a method utilizing an income trajectory index is more efficient than one based on the use of aspiration levels per management period. Smooth trajectories can be attained by squaring the deviation of the feasible trajectories from the desired one.
The study deals with medium-term economic planning for a multi-branched farm enterprise on which agriculture and forestry plus associated livelihoods are practiced. A personal enterprise consisting of the earning economy sphere of an individual person or family is found to provide a suitable point of departure and framework for farm enterprise planning. In this case, the consumer economy cash withdrawals of the entrepreneur and members of his family are linked to the planning model. In a combined planning model of this type serving the management of the agricultural entrepreneur’s entire economy, the problems of both the real process (chiefly pertaining to agriculture and forestry) and the financial process are solved simultaneously and optimally with regard to the goal function, taking into consideration the model’s production factor, financing, taxation and other such constraints. The model also takes into account the possibility of investing money in financial targets (e.g. governments bonds and stocks).
The study consists of constructing a multi-periodic, combined planning model in the form required by linear optimization. The model is applied to the economic planning of a farm and its adjoining woodlot located in south-western Finland. In order to simplify the presentation of the matter, the case calculation is made to apply to a planning period only two years; the time span in the formulae used in the model is actually ten years. For the same reason, the number of treatment alternatives for the stands in the woodlot may appear to be unrealistically small.
Within the planning period the model does not require the use of the calculation rate of interest typical of partial models; instead, it itself provides the solution to where to invest and what the financing costs will be. An essential feature of the model is that the plan for the entire farm is not compiled by adapting to one another the plans made separately for farming, forestry etc., and financing; instead, the entire real process and financial process plan are obtained as the solution for the model.
The PDF includes a summary in Finnish.
The effects and relative efficiency of alternative forest taxes are analysed theoretically. The Fisherian two-period model of consumption, savings and timber harvesting is extended by incorporating the management intensity decision and deriving the concept of long-run timber supply. The effects of lump-sum (site productivity), realized income (yield) and ad valorem property taxes on short-run timber supply, management intensity, and long-run timber supply are established. As the core of the study, the alternative taxes are compared in order to determine the appropriate forest tax regime in terms of production efficiency. The efficiency criterion generally requires that the excess burden of taxation at any given tax revenue should be kept to a minimum. The study distinguishes between an initially undistorted economy and an economy with pre-existing distortions due to capital income taxation (interest charge deductions). When the effects on forest management decisions of forest and capital income taxes are considered as a whole, a neutral forest taxation is no longer efficient. The non-timber benefits of a forest are incorporated to examine the robustness of the tax results with respect to the objective function. Finally, forest tax issues specific to Finland are considered, and administrational and equity aspects are discussed.
The PDF includes a summary in Finnish.