Martin Faustmann | |
|---|---|
| Born | 19 February 1822 |
| Died | 1 February 1876 (aged 53) |
Martin Faustmann was a German forester who is regarded as the father of forest economics. [1] His 1849 analysis of the optimal rotation problem, often referred to as the Faustmann formula, remains in widespread use in natural resource valuation and policy analysis, [2] [3] and continues to be a topic of active research. [4] [3]
Biography
Faustmann studied Catholic theology at the University of Giessen for one semester in 1841 before turning to forestry. [5] He completed his examinations in 1848 and became the chief forester of Dudenhofen near Darmstadt, where he remained until his death. [2]
Scientific contributions
A foundational problem in the economics of forest management concerns the optimal age at which a stand should be harvested (i.e. whether it would be better to harvest and sell younger trees today, or wait for them to grow and obtain a larger timber sale revenue later). [2]
The key insight of Faustmann's formula is that because timber is a renewable resource, it is not possible to answer this question by accounting for standing timber alone. Although the impatient forester receives a smaller payment by harvesting younger trees, they also gain the opportunity to re-plant sooner. [2] [4] In other words, if a patient forester chooses to let their stand grow for an additional decade, they might receive a much larger timber sale revenue, but at the cost of delaying the next rotation: after harvesting, they are left with bare land, while their impatient colleague now has 10-year-old-trees.
Faustmann's formula allows forest managers to consistently solve for the optimal harvest age given information about the growth rate of the stand, expected timber prices, and a discount rate. [2] The formula circumvents the problem of infinite regress because it can be simplified and solved as a geometric series. [6] Because it accounts for the time value of money (or the opportunity cost of delaying a harvest), the financially optimal Faustmann rotation is generally shorter than the biologically optimal rotation age.
References
- ^ Kurtilla, John V; Bowes, Michael D (1989). "Economics and public forestland management". Natural Resources Journal. 29 (3): 738. Retrieved 12 March 2024.
- ^ a b c d e Brazee, Richard J (2001). "The Faustmann Formula: Fundamental to forest economics 150 years after publication". Forest Science. 47 (4): 441. ProQuest 197721570. Retrieved 12 March 2024.
- ^ a b McIntosh, Michael G; Zhang, Daowei (2024). "Faustmann formula and its use in forest asset valuation: a review and suggestion". Forest Policy and Economics. 160: 103158. doi: 10.1016/j.forpol.2024.103158. S2CID 267236224. Retrieved 12 March 2024.
- ^ a b Knoke, Thomas (2019). "The optimal rotation for a fully regulated forest is the same as, or shorter than, the rotation for a single even-aged forest stand: comments on Helmedag's (2018) paper". European Journal of Forest Research. 139: 133–143. doi: 10.1007/s10342-019-01242-x. S2CID 254193583. Retrieved 12 March 2024.
-
^ Rafał Chudy (2016).
"The Faustmann Symposium was held this year in China". Forest Monitor. Archived from the original on 16 January 2021. Retrieved 12 March 2024.
{{ cite web}}: CS1 maint: bot: original URL status unknown ( link) - ^ Straka, Thomas J; Bullard, Steven H (1996). "Land expectation value calculation in timberland valuation" (PDF). The Appraisal Journal. 64 (4): 339–343. Retrieved 13 March 2024.
Martin Faustmann | |
|---|---|
| Born | 19 February 1822 |
| Died | 1 February 1876 (aged 53) |
Martin Faustmann was a German forester who is regarded as the father of forest economics. [1] His 1849 analysis of the optimal rotation problem, often referred to as the Faustmann formula, remains in widespread use in natural resource valuation and policy analysis, [2] [3] and continues to be a topic of active research. [4] [3]
Biography
Faustmann studied Catholic theology at the University of Giessen for one semester in 1841 before turning to forestry. [5] He completed his examinations in 1848 and became the chief forester of Dudenhofen near Darmstadt, where he remained until his death. [2]
Scientific contributions
A foundational problem in the economics of forest management concerns the optimal age at which a stand should be harvested (i.e. whether it would be better to harvest and sell younger trees today, or wait for them to grow and obtain a larger timber sale revenue later). [2]
The key insight of Faustmann's formula is that because timber is a renewable resource, it is not possible to answer this question by accounting for standing timber alone. Although the impatient forester receives a smaller payment by harvesting younger trees, they also gain the opportunity to re-plant sooner. [2] [4] In other words, if a patient forester chooses to let their stand grow for an additional decade, they might receive a much larger timber sale revenue, but at the cost of delaying the next rotation: after harvesting, they are left with bare land, while their impatient colleague now has 10-year-old-trees.
Faustmann's formula allows forest managers to consistently solve for the optimal harvest age given information about the growth rate of the stand, expected timber prices, and a discount rate. [2] The formula circumvents the problem of infinite regress because it can be simplified and solved as a geometric series. [6] Because it accounts for the time value of money (or the opportunity cost of delaying a harvest), the financially optimal Faustmann rotation is generally shorter than the biologically optimal rotation age.
References
- ^ Kurtilla, John V; Bowes, Michael D (1989). "Economics and public forestland management". Natural Resources Journal. 29 (3): 738. Retrieved 12 March 2024.
- ^ a b c d e Brazee, Richard J (2001). "The Faustmann Formula: Fundamental to forest economics 150 years after publication". Forest Science. 47 (4): 441. ProQuest 197721570. Retrieved 12 March 2024.
- ^ a b McIntosh, Michael G; Zhang, Daowei (2024). "Faustmann formula and its use in forest asset valuation: a review and suggestion". Forest Policy and Economics. 160: 103158. doi: 10.1016/j.forpol.2024.103158. S2CID 267236224. Retrieved 12 March 2024.
- ^ a b Knoke, Thomas (2019). "The optimal rotation for a fully regulated forest is the same as, or shorter than, the rotation for a single even-aged forest stand: comments on Helmedag's (2018) paper". European Journal of Forest Research. 139: 133–143. doi: 10.1007/s10342-019-01242-x. S2CID 254193583. Retrieved 12 March 2024.
-
^ Rafał Chudy (2016).
"The Faustmann Symposium was held this year in China". Forest Monitor. Archived from the original on 16 January 2021. Retrieved 12 March 2024.
{{ cite web}}: CS1 maint: bot: original URL status unknown ( link) - ^ Straka, Thomas J; Bullard, Steven H (1996). "Land expectation value calculation in timberland valuation" (PDF). The Appraisal Journal. 64 (4): 339–343. Retrieved 13 March 2024.