Transcript Chapter 1 - Natural Resource Ecology and Management

Chapter 3: Markets,
Governments, and Forest
Resources
Text: Cubbage et al., 1992
Questions:
Should forests be under public/gov’t
control/ownership?
Who can best determine the allocation &
distribution of natural resources: government
or private sector?
Revisiting an old issue:
Privatization of forest resources
• Should forests be under public/gov’t
control/ownership?
• If gov’t intervenes, to what extent should it
intervene?
Advantages of private control of resources:
Advantages of private control of resources:
• Private will produce & supply goods if $ is made
• Healthy property rights system needed for
market system to function
• Market place - people vote with their $ and are
more responsive; Government - no continuity,
officials have service terms, admin changes
• Private allocates resources more efficiently than
government
Advantages of public control of resources:
Advantages of public control of resources:
• Regardless of economic shape, public still
concerned with environment
• Management separated from ownership –
private management can easily “cook”
books to show efficiency (examples?)
• Public/political process  more
accountability, transparency
• Political process  checks on operations
of bureaucrats
So what is best?
• Private ownership?
• Public ownership?
• Any other form?
Advantages for mixed control of resources:
• Shortcomings of the markets – limited
• Political incentives to adopt public
programs
• Above reasons will lead to extensive
government involvement in forest resource
allocation
A Mixed Forest Economy
Scarce Resources
Public means
Private means
Budget
Market
Political process
Pricing process
Public wants
Private wants
Human wants
(wood, water, wildlife, recreation, range,
wilderness, aesthetics, minerals, etc.)
Figure 3-1. Mixed forest economy
Approaches to allocating and distributing
forest resources:
1. unregulated markets
2. gov’t educ./assistance for landowners to
promote public goals,
3. gov’t regulation of resource mgmt on private
lands;
4. public ownership & gov’t mgmt of forest
lands
Forests and American Values
American values influence forest policy. But
values vary through time & among groups.
1. Individualism and Property Rights
2. Community, and Equity and Democracy
3. Integration (individualism & community/equity)
Market and Non-Market Goods
1. Market Goods
•
•
with exclusive rights; traded in market
Principle of exclusion can be applied
2. Non-Market Goods
•
One’s consumption doesn’t exclude others from
enjoying same
Joint consumption – use of good by > 1 person
Market and Non-Market Goods :
Other classifications – 4 types
1.
2.
3.
4.
Private goods – timber, forage
Toll goods – air, fish in open sea
Common-pool goods – national parks, movies
Collective goods – air/water pollution control, police protection
Gov’t:
 intervention –decision-making/enforcement (collective or
common-pool goods)
 works with private sector (provision & distribution of collective
goods/services)
Forest Outputs & Issues
• Variety of forest goods & services
• Problems arising from varying degrees of:
– joint production (MU)
– exclusivity vs jointness of consumption,
– marketability
• Commodity-noncommodity nature
• Result: Issues!
Forest Resource Outputs – Issue/s?
• Timber
• Wildlife
• Range
• Water
• Recreation
• Wilderness
• Others – Minerals, gas, and oil lie underneath forest
lands; residences and vacation homes in forest lands
Markets & Forest Resources: The
Neoclassical Economic Theory
• basic assumption: free-market economy
• Adam Smith: Supply & demand determine price
• Alfred Marshall: free-market economy generated by
the price system
– implies individuals’ wants should govern resource use;
– efficiency is sole criterion for allocation of goods & serv.
• Values not always consistent with American
commitments to equity, equality, community.
Efficient Market Requirements:
Four conditions to achieve efficiency
1. establish property rights to resources
2. buyers & sellers have perfect knowledge
3. atomistic competition
4. transaction costs = 0
• Gov’t role limited to deciding income distribution Q’s;
defining/enforcing rules of property & exchange
• Voluntary market exchange; efficiency criterion
Causes of Market Failures
1. property rights not adequately defined
2. non-market costs & benefits (externalities or
secondary effects) not reflected in market;
3. imperfect knowledge (in forestry applies more in
production side!
4. imperfect competition – some sellers/buyers
can affect price!
The Equity Problem
• Equity – who benefits? who pays?
• Difficult to determine esp. when non-market benefits &
costs are associated
• Distribution of Benefits – problems
• Equity considerations justify gov’t involvement in
producing & allocating forest, wildlife, & recreation res.
• It is a major justification for public parks, wildlife
reserves, and associated public resource mgmt
agencies!
Government & Forestry
• Economic Systems
– capitalistic vs. communism  pros & cons
– Cowboy Economy vs. Spaceman Economy
• Conservation and the Land Ethic -– Aldo Leopold & A Sand County Almanac (Land Ethic)
– EF Schumacher – “Small Is Beautiful” – rejected economic
efficiency as sole relevant criterion for decisions.
• Decision Guidelines – social, political, economic, environ.
• Illustration: Historic Forestry Debates
– Market Proponents – lumber industry; Wilson Compton, in 1919
national debate on federal regulations on private timber cutting &
forest mgmt
– Government Advocates – Committee for the Application of
Forestry (foresters
Cowboy Economy vs. Spaceman Economy
Cowboy Economy
• Open economy; past
• Resources regarded as
limitless; Exploitative
• Production, consumption
viewed favorably
• Lives for the day, ignores
tomorrow
Spaceman Economy
• Closed economy; present
• Earth has limited reserves
of resources
• Minimize consumption &
production
• Conservation of resources
for future generation
Schumacher: “Small Is Beautiful”
• Economics -- not the only relevant criteria for decisions.
• Decisions produced using econ criteria are fragmentary!
– Supply only one result  whether or not it yields $ to those who
undertake the activity
• Using economics, if something fails to earn an adequate
profit in $ terms  not good!
• There are other assets or activities that society keeps or
does because of non-economic values (social, moral,
natural, etc)
Leopold’s Land Ethic
• A Sand County Almanac
• Criticism on the strength of the profit motive (economics)
in land use decisions
• Considers intrinsic values of components in the
ecosystem otherwise not meeting $ gains
• Advocates gov’t conservation, limits to gov’t enterprise
• Land ethic – later became part of SAF’s Code of Ethics
Leopold’s Land Ethic
• Land ethic: “… a system of conservation based solely on
economic self-interest is hopelessly lopsided. It tends to
ignore, and thus eventually to eliminate, many elements
in the land community that lack commercial value, but
that are essential to its healthy functioning. It assumes
falsely…that the economic parts of the biotic clock will
function without the uneconomic parts. It tends to
relegate to gov’t many functions eventually too large, too
complex, or too widely dispersed to be performed by
gov’t.”
Compton’s 1919 treatise on issues to
support market/private control of resources
Which of his 14 issues are still current/
relevant today?
Compton’s 1919 treatise on issues to support
market/private control of resources
1. “cheap & plentiful timber not a sign of wealth” – forest products
cheaper than other commodities producible from same land &
capital, so that forestry not a good use of land & capital.
2. non-reforestation of cut-over lands – not a misfortune?
3. old-growth forests? harvest of old trees – not a public loss?
4. loss of species – not detrimental to public welfare
5. land’s greatest productive use should not dictate its use, that is,
lands should not be used for growing trees even if they are suited
for growing trees.
6. disappearance of timber industries in certain regions due to
exhaustion of timber supplies is not necessarily a local or national
misfortune
Compton’s 1919 treatise on issues…
7. timber as a “mine” and not a “crop”
8. shrinking employment in the forest industry
9. land use change from forest to non-forest uses, esp. if reforesting it
is poor economics
10. poor quality cutover sites are uneconomical to reforest; if public
wants it – then public does it!
11. no difference in public vs. public obligation in using lands to grow
timber or ag crops for profit?
12. incentives issue -- How much to pay landowner to produce for
public benefits or gains?
13. equity issue – public use of private land, public pays additional cost
14. maintenance of idleness of cut-over lands is not always wasteful
Crompton’s 1919 treatise on issues to
support market/private control of resources
Current: 2, 4, 5, 6, 10, 12, 13
Not current: 1, 3, 7, 8, 9, 11, 14
numbers 2, 5, and 10 are similar!
Compton’s 1919 treatise on issues to
support market/private control of resources
1. “cheap & plentiful timber not a sign of wealth” – forest products
cheaper than other commodities producible from same land &
capital, so that forestry not a good use of land & capital!!!!
2. non-reforestation of cut-over lands – not a misfortune???-- real issue
3. old-growth forests? [harvest of old trees > new trees growing] – not
a public loss?
4. loss of species – not detrimental to public welfare
5. land’s greatest productive use should not dictate its use, that is,
lands should not be used for growing trees even if they are suited
for growing trees! – TRUE  urbanization + other uses
6. disappearance of timber industries in certain regions due to
exhaustion of timber supplies is not necessarily a local or national
misfortune
Compton’s 1919 treatise on issues to
support market/private control of resources
7. timber as a “mine” and not a “crop” --- no longer an item today!
8. shrinking employment in the forest industry – relate to #6
9. land use change from forest to non-forest uses, esp. if reforesting it
is poor economics
10. poor quality cutover sites are uneconomical to reforest; if public
wants it – then public does it!
11. no difference in public vs. public obligation in using lands to grow
timber or ag crops for profit???
12. incentives issue -- How much to pay landowner to produce for
public benefits or gains?
13. equity issue – public public use of private land, public pays
additional cost
14. maintenance of the idleness of cut-over lands is not always
wasteful
Illustration: Privatization of NZ Forest Service
• Q: is it possible to do in the US what NZ did for its forest service?
• Background: NZ Forest Service did same thing as USFS:
–
–
–
research, landowner assistance, policy development, pest control,
mgmt of publicly owned forest land.
Developed & managed plantations; also sold timber (commercial).
Lost money; they tried to fulfill political objectives at the expense of
business objectives.
• 1980s altered its public policies on forestry
• 1983: newly elected Prime Minister did some changes in forestry
– Min. of Forests – research, policy dev’t, landowner assistance
– Min. of Environment – control native forests, most were
reserved as national parks
– NZ Forestry Corp. – mgmt of plantations and sawmills; sold to
private investors; later sold timber only, not lands
Illustration: Privatization of NZ Forest Service
• Q: is it possible to do in the US what NZ did for its forest service?
• In US, possible reasons and proposals for privatization:
– Outright sale
– Long-term leasing of productive forest lands to industry for
mgmt & harvest rights
– Short-term granting of concession rights to the land
– Cost-sharing arrangements between public & private orgs.
– Problems in western US public range mgmt – prompted similar
call for privatization!