Economically Sustainable Working Forests:

Abstract

Economic viability is an important part of the sustainability of working forests. With landowners facing increasing regulatory complexity, increasing demand for a diversity of forest outputs, and economic pressures to convert to non-forest uses, it is important to understand the financial principles that drive economic viability. A fundamental principle is that the value of money is time-sensitive such that present costs and benefits carry greater weight than those in the future. This has profound implications given the long-term nature of forestry investments. The principles of compounding and discounting allow for equivalent comparisons of costs and benefits occurring at disparate times. These principles are the key to understanding the economic value of land and timber, and they allow for analysis of economic optimization relative to both timber and non-timber values. Likewise they allow for analysis of the economic impacts of policy measures such as taxes and regulations, providing important insights to help policymakers to better achieve goals and avoid unintended consequences.