Tuesday 19th February 2013
Room 241, Level 2, Biomedical Building, 1 Central Avenue, Australian Technology Park, Eveleigh, University of Sydney
"Faustmann’s Formulae for Forest Capital"
Prof Robert D. Cairns, Department of Economics and Cireq, McGill University
3:00-4:30 PM, Tues 19 Feb, 2013, Room 241, Level 2, Biomedical Building, 1 Central Avenue, Australian Technology Park, Eveleigh, University of Sydney. The associated paper [PDF] is attached.
The relationship of the economics of a simple, stylized forestry to capital theory is studied. Investment and two r-percent rules are discussed. A forest’s two resources, the stand and the land, act in conjunction as a single capital asset. If capital is comprehensively defined, there is no role for the concept of an internal rate of return. A forest provides real options in optimal and sub-optimal rotation patterns. Old growth has superficial similarities to a exhaustible resource, but the forest still consists of two resources that, in conjunction, behave comparably to a plantation forest.