Figures in Forest Economicsprepared by Daowei ZhangTo accompany Forest Economics by Daowei Zhang and Peter H. PearsePublished by UBC Press, 2011Total value of a forestExtractive value Non-extractive valueNon-timber value (e.g., fruits, nuts, mushrooms, livestock fodder, game)Ecosystem (environmental) service value (e.g., soil and water protection, biodiversity, climate mitigation)Timber value (e.g., industrial timber, fuel wood)Preservation value (e.g., existence value, option value, bequest value)Figure 1.1: A forest's economic valueAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. baK0Isoquants for labourand capitalFigure 2.1a: Relationship between output and inputsQuantity of capitalLQuantity of labourAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Quantity of labour0Response of total output to changes in labour input when capital and other factors are held constantTotal product QLFigure 2.1b: Relationship between output and labourAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. MPPL0Diminishing marginal product of labourQuantity of labourLFigure 2.1c: Relationship between output and labour: Law of diminishing marginal productsAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. LQuantity of capitalTotal product QQuantity of labour0Response of total output to changes in labourinput when capital and other factors are held constantMPPL0Diminishing marginal product of labourbaK0Isoquants for labour and capitalFigure 2.1: Relationship between output and inputsAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 2.2: Isocost curve for capital and labour0 LQuantity of capitalKBAQuantity of labourAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 2.3: Expansion path of efficient input combinationsaABExpansion path0 LQuantity of capitalKbQuantity of labourAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 3.1: Decision tree for a pest control projectP = 0.8C = $119,244P = 0.24sprayno infestationno sprayinfestationno infestationinfestation spray succeedsspray failsP = 0.2P = 0.8P = 0.3P = 0.7P = 0.2C = $35,000P = 0.2C = $35,000P = 0.56C = $0P = 0.2C = $84,244P = 0.8Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Real price Nominal priceReal interest rate √×(inflates the returns of forest projects)Nominal interest rate×(biased against forest projects)√Figure 3.2: Correct and incorrect match of interest rate and timber price in forest investment analysis√ = correct match, × = incorrect match.Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 3.3: Value of a pre-merchantable loblolly pine timber stand: Difference between discounting at age 30, when the stand is ready for a final harvest (valued at B), and at age 15, when the stand just becomes merchantable (valued at A)Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 4.1: Market supply, demand, and net value of a forest productepPrice ($)Producer surplusConsumer surplusDemandSupply0 qAnnual quantity (cubic metres)Factor costsdsAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 4.2: Relative elasticity and welfare change resulted from an increase in supplyE1S1S2Q2P1E2P20Price ($)Q1 BCDAQuantityAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. +Logging andtransportation costs+ManufacturingcostsFigure 4.3: Linkage among stumpage, log, and forest products marketsStanding timberDelivered logsForest ProductsAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 4.4: Prices for softwood lumber, sawlogs, and sawtimber stumpage in the southern United States: 1955-2001 (MBF = thousand board feet)Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 4.5: Derived demand for pulpwood in newsprint productionQuantity of pulpwoodABC0Demand for pulpwood0Quantity of newsprintDemand for newsprintSupply of all factors other than pulpwood in newsprint productionPrice ($)Price ($)Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 4.6: Timber demand and supply for timber in short and long-runp Equilibrium priceDemandVery long-run supplyLong-run supplyShort-run supply0Price ($)Quantity of timber demanded and supplied per periodqAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 4.7: Long-run supply response when demand shifts upwardabcQ2001$ per unitQ2005Q2000D2000S2000 (S2001)S2005S2000-05D2001-05P2001P2005P2000Quantity QPAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 4.8: Relationship between net value of timber and economically recoverable inventory+Quantity of timber (cubic metres)Least valuable stands–0Net value($ percubic metre)Economically recoverable inventoryMost valuable standsTotal inventoryExtensive marginAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 4.9: Long-run timber supply projection50 100 150 2000Supply of timber per year (cubic metres)Years from the presentAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 5.1: Market demand and consumer surpluss¢sPrice ($)d¢Total paymentp¢pConsumer surplus0 qdQuantity demandedAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 5.2: Equilibrium level of recreation consumption at two levels of fixed costVXTMRXRMQM QXVMTXYIncome ($)Z0IIIRecreation daysAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 5.3: Zones of travel origin to a recreational siteZone 4Zone 3Zone 2Zone 1Recreational siteAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 5.4: Derivation of the demand curve for a recreational site from travel costsBNumber of visitsDemand curveHypothetical price ($)0 10,000 20,000 30,000403530252015105A0 5 10 15 20 25Participation rate (%)Travel cost ($)Relationship between travel cost and participation rate5040302010 Zone 1Zone 2Zone 330,000Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 5.5: Effect of crowding on demand for a recreational opportunity0Price ($)Quantity demandedUncrowdedCrowdedAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 6.1: Efficient application of labour to a forest siteQuantity of labour (person-days)qWage0Marginal revenue product of labour ($) p0Value of the forest crop ($ per hectare)Quantity of labour (person-days)Payment to labourLand rentEfficient quantityof labourAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 6.2: Relationship between price of timber and productive timberlandeDemandSupplymqProductive timberland (hectares)Rent0Price ($)pAnnual harvest (cubic metres)1Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 6.3: Efficient allocation of land among different usesedcForestryFarmingResidentialCommercial0aLand rent ($)Distance from urban centre (kilometres)bAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Complementary usesTRCompeting usesACubic metres of timberper yearRecreation days per year0TRMutually exclusive usesB0TRHighly conflicting usesC0TRConstantly substitutable usesD0TRIndependent usesE0TR0FFigure 6.4: Types of production possibilities for two products on a tract of landAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 7.1: Growth in volume and stumpage value of a forest as it increases in ageAge (years)Optimal harvest age for a single cropiDS/S(t)Rate of growth DS/S(t) in stumpage value (% per year)t*Value or volume of timberAverage and incremental growth in value ($ per hectare per year)ValueVolumeAverage growth Incremental growth S(t)/tDSAge (years)Age (years)S(t)Q(t)Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Rotation age (years)Incremental growth in value DS/S(t)Annual costs and returns ($)t*itFFigure 7.2: Optimal economic rotation for continuous forest cropsAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 7.3: Incremental growth in value and costs with stand ageAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 7.4: Relationship between stand age and various amenity values0N(t) IVIIIIIItStand ageAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 8.1: Per-acre annual growth, removal, and inventory on private timberland in the US, 1953-2007Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 8.2: Age-class distribution of inventory in private timberland in western Oregon, 199702004006008001,0001,2000-9 10-29 20-29 30-39 40-49 50-59 60-69 70-79 >79Thousands of acresStand Age (years)Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 9.1: Forest area in the United States by region, 1630-2002Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 9.2: Real price indices for lumber and stumpage, in terms of 1992 prices (1992 = 100)Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 9.3: The Erie Canal Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Cost or expected revenue per unit of effort ($/E)Marginal revenue productwE*(P0) E*(P¢)Figure 9.4: Optimal reforestation effort, E*, changes when stumpage price increasesAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 9.5: Private tree planting in the US South by ownership, 1928-2003Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. QMarginal benefits associated with pulp output0Marginal benefits and costs ($)Output per unit of timeCBAMCMBEMarginal costs imposed on fishermen Figure 10.1: The Coase TheoremAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 10.2: Degrees of exclusiveness of forest tenureRestricted usersStinted users Exclusive usersReserves for special usersHarvesting permitsMultiple quota rightsLicencesLeasesUncontrolled accessUnlimited usersNo propertyComplete propertyFreeholdTransferabilityBenefits conferredDurationExclusiveness Comprehensiveness SecurityComplete property rightsNo property rightsIncomplete property rightsFigure 10.3: Combinations of attributes in forest propertyAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 11.1: Effect of a royalty or severance tax on the range of log quality that can be profitably harvestedgt0 gHarvesting costGross valueValue net of taxMarginal log without taxMarginal log with taxCost, value percubic metreTaxQuality of logHigh Low Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Although the next two graphs (Figures 11.1a and 11.2b) do not appear in Forestry Economics, the material in these graphs are discussed on page 315 of the book. They are presented here to facilitate teaching and help students understand the relevant discussion on yield taxes. Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 11.1a: Effect of a yield tax that applies to the gross value of logs on the range of log quality that can be profitably harvestedgt0 gHarvesting costGross valueValue net of taxMarginal log without taxMarginal log with taxCost, value percubic metreTaxQuality of logHigh Low Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 11.1b: Effect of a yield tax that applies to the net value of logs on the range of log quality that can be profitably harvested0 gt=gHarvesting costGross valueValue net of taxMarginal log without taxMarginal log with taxCost, value percubic metreTaxQuality of logHigh Low Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. GS1S2Q2PpP1E2E1Pc0Price ($)QuantityQ1D1FD2Figure 11.2: The relative burden of taxAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 12.1: Global export volume of different forest products, 1970-2006Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. PriceXDUVXSWLM KQuantityCountry B Country ADASADB SBTPBPfPA0QB QAQfFigure 12.2: Determination of price and quantity of plywood to be imported and exported when trade is free, transportation costs are negligible, and all else remains constantAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 12.3: US outward and inward foreign direct investment in forest industry in constant 2000 US$, 1983-2008Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Figure 12.4: Canadian outward and inward foreign direct investment in forest industry in 2000 constant CND$, 1983-2008Adapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Environmental degradation Environmental improvementTurning point incomePer capita incomeEnvironmentaldegradationFigure 13.1: The Environmental Kuznets CurveAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011. Agents§ Slash and burn farmers§ Agribusiness§ Cattle ranchers§ Miners§ Oil corporations§ Loggers§ Non-timber commercial corporationsMarket failures§ Unpriced forest goods and services§ Monopolies and monopolistic forcesMistaken policy interventions§ Wrong incentives§ Regulatory mechanisms§ Government investmentGovernment weakness§ Concentration of ownership§ Weak property rights arrangements§ Illegal activities and corruptionBroader socioeconomic & political causes§ Population growth and density§ Economic growth§ Distribution of economic and political power§ “Excessive” consumption§ Global warming§ War and political instabilityResulting from human activity§ Agricultural expansion§ Cattle ranching§ Logging§ Mining and oil extraction§ Construction of dams§ RoadsNatural causes§ Hurricanes§ Fires§ Pests§ FloodsDirect causes Underlying causesFigure 13.2: Direct and underlying causes of tropical deforestationAdapted from Forest Economics by Daowei Zhang and Peter H. Pearse, published by UBC Press, 2011.