111111 I11'WI'; 11'1 1.1.11'I11I1‘II 11III1'11'1'I1I1'I' I I'1'I11'1' ' '1 1'" "'1'1 1'II1'1'I "" '1I I 1" ;1I , 1 . 1 1111111111 11111111 I "1111' " 111 11"" ;;I I"'. I1 II1I11IIIIIII1II ' 1I'I111111'11' 111111111111'1'I11 11 ;II""I 1111I1I 1'11""1 1 ; ;;;I;; "II'"II;II I '1'"""1" "' 1111 1 1 'I11'1I1. -MT; ‘ _ 'H mitt -_‘ -—-.¢ -_ "11 "'1' es...—~.n 1 1 11',;11111.1111 ‘ ' ' MIIII 1 11111 ""111 1""'11 1I'11I ' 111. 1111 III 1111" "11111111 1111111 1111 1 ""11 '1"1"""'I '111' 111 111111 'I1 1,.1I11'. ,; 1'1 1'11 I1" 111 '1111 11""11'1'11' "' 1 11 1'11'1'1111'1111II1'I 11'1111 11'I"- '111"11 'mI" 1""1'1'1 1"'1"I'I I1'I 3111 '1 11"1 II111'11I11I11 ' ""'1I;111'I “-1'1'11""I"' "'1 11"11'1 '1'1'11 "1'1 11,1 1 I 1'I"'1""'1"|1‘1 11"" 1II11'11' 'I11II'1' I "'1""I "11"'1'~'11"" 11.11114 11111111111 11‘ 111111 '1‘" 1111'" ""‘I 1I'111 1 '11'1I i '1 '1: '1'" 'I' """"""' 1'I1'"I"1'1‘1h1'1"" 11:. 11I1'1'"1""1""'1'1"" ’1111 I" '1 111111" "I11 '1'11'1, 1'” II '1'I'1 " ‘1" '11"'.'; 1' '1" "I ;; . "1'1 '1"' "' 1 1"11" 1'1”"."1 '1 "'1 ' '.111. '11'1'1': 11." 1111111 1'11'11' 1n1'1'1111 117111111111111111'111111111"1 11. v—Lw _ a?“ _m—:__~‘ I111I1,1 1'1 *‘rf. ”n.’-:33.“ W “V —~ ”b.“ 1......“ _a_ o— -_ ‘ .- ‘10 o u '|.11 'I' 1'1 11: 1 1" ' 1. s. *- pg?” -- —!‘f<, - . V 4. . o ' V o . .. _ _' - - ~1- . .. -‘ - v. I ‘ ‘ . ,. ' .‘ " ‘ ' qn. ‘ _ .-. _ ' .- _, ‘ ‘ - . .- - _ ‘ - - .- - ‘ ' —- ' , a- .-- - a, a . .. '3 - -_ .. - - .. - - ‘ fl _ w7h' . v ' _ ., _ .4 n. . . - ' - p - .. .... .. -... J , - - _ _ _ A . U 4 v ' ’ . , .1... - . , ‘ 4 v‘ D .. - . - “w M: 2335-; 2:- “FF“ 1‘11 "1",";111'1 '""11 111 1 I'11'1'1"1 11 .11‘1, ._J~ I ¢ ~-. ‘1-1'11‘4 ."11'1'v 1.! 1 1. 1' ~ .q—J“ - 111 ."" <— V v w ._ -... _ ”I ~ .- ECONOMIC EFFICIENCY VS. LOCAL ECONOMIC IMPACT: A COMPARISON OF NATIONAL FOREST MANAGEMENT PROGRAMS BY Ellen Johnson Hall A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Forestry 1982 ABSTRACT ECONOMIC EFFICIENCY VS. LOCAL ECONOMIC IMPACT: A COMPARISON OF NATIONAL FOREST MANAGEMENT PROGRAMS BY Ellen Johnson Hall The USDA Forest Service has traditionally maintained an interest in the impact of national forest management on local communities. The desire to maintain stable communities has been used as a defense for following less than efficient management policies. Rational policy decisions must be supported by knowledge of the associated costs and benefits. The problem considered in this research is how to measure the impact of forest management policies on a local economy and how to compare that impact to the cost of achieving it. A case study of the Idaho Panhandle National Forests is used to illustrate the method. The research follows a four step procedure. First, a model is developed defining the conditions which maximize the present value of timber management. Next, the present value maximizing alternative and three other alternatives are developed using the FORPLAN linear programming model. The cost of the three alternate management strategies is identified as the present net value loss compared to the maximum. Third, the impact of each alternative on local employment and income is determined using an input-output model. Finally, losses in the present net value of timber management are compared to gains in the m present net value of local income produced. By using a common unit of measure, the relative costs and benefits of each timber management alternative can be determined. Major findings include the following: 1. The impact on the local economy of deviating from a model of efficient timber management varies. Policies which push the harvest above the efficient level or increase Forest Service costs are locally advantageous. Policies which keep the harvest below the efficient level or reduce Forest Service costs are locally disadvantageous. 2. Environmental considerations can fall anywhere in the spectrum, adding either to national efficiency or to local economic benefit. 3. In all cases considered in this analysis, local income gains were less than the present net value loss associated with deviation from the efficiency model. All benefit-cost ratios were less than one. Other results might be possible given other management alternatives, a different local economic structure or a different time frame. ACKNOWLEDGEMENTS The author wishes to express her warm appreciation for the assistance of her graduate committee chairman, Dr. Robert J. Marty, and committee members Dr. Daniel E. Chappelle and Dr. Victor J. Rudolph. Special thanks are given for the support received from three special people: Harry Hall, Gerry House, and Debra Baker. ii I. II. III. IV. TABLE OF CONTENTS LIST OF TABLES . . . . . . . . . . . . . . . . . . LIST OF FIGURES. . . . . . . . . . . . . . . . . . . INTRODUCTION 0 O O O O O O O O O O O O O O O O O O I Research Problem . . . . . . . . . . . . . . . . . Research Objectives. . . . . . . . . . . . . . . Economic Efficiency Criteria in Forest Management. The Sustained Yield-Community Stability Link . . . Critique of the Sustained Yield-Community Stability Link . . . . . . . . . . . . . . . . . Major Findings . . . . . . . . . . . . . . . . . PURPOSE, SCOPE AND RESEARCH PROCEDURE. . . . . . . . Purpose of the Research. . . . . . . . . . . . . . Scope of the Research. . . . . . . . . . . . . . . Research Procedure . . . . . . . . . . . . . . . DEVELOPMENT AND APPLICATION OF THE EFFICIENCY MODEL. The Conceptual Efficiency Model. . . . . . . . . . Application of the Conceptual Model. . . . . . . . THE IDAHO PANHANDLE NATIONAL FOREST EFFICIENCY MODEL The FORPLAN Model. . . . . . . . . . . . . . . . . Management Prescriptions . . . . . . . . . . . . Analysis Areas . . . . . . . . . . . . . . . . . Economics Tables . . . . . . . . . . . . . . . . Yield Tables . . . . . . . . . . . . . . . . . . Formulation of the Efficiency Model. . . . . . . ALTERNATIVES TO THE EFFICIENCY MODEL . . . . . . . . Alternatives to the Efficiency Model . . . . . . . Alternative 2. . . . . . . . . . . . . . . . . . Alternative 3. . . . . . . . . . . . . . . . . . Alternative 4. . . . . . . . . . . . . . . . . . Comparison of Alternatives . . . . . . . . . . . . Present Net Value. . . . . . . . . . . . . . . . Timber Volume. . . . . . . . . . . . . . . . . Land Allocation. . . . . . . . . . . . . . . . . Factors Affecting Costs. . . . . . . . . . . . . iii vi J-‘wNH woo 13 13 14 15 17 18 20 28 29 29 3O 31 33 33 39 39 39 41 42 43 43 45 47 47 VI. VII. VIII. THE ECONOMIC IMPACT AREA . . . . . . . . . . . . . . . Timber Dependency in the Impact Area . . . . . . . . IPNF Relationship to Local Forest Industry . . . . . IMPACT OF THE ALTERNATIVES ON THE LOCAL ECONOMY. . . . Input-output MOdel Formlllation o o o o o o o o o o 0 Components of Change in Local Income and Employment. Results Of ApplYing the I-0 Madelo o o o o o o o o o EVALUATING TRADEOFFS BETWEEN EFFICIENCY AND THE LOCAIJ ECONOW O O O O O O O O O O O O O O O O 0 Measuring the Tradeoff . . . . . . . . . . . . . . . Summary and Conclusions. . . . . . . . . . . . . . Suggestions for Further Application and Research . . LIST OF REFMCES O O O O O O O O O O O O O O O O O 0 iv 51 51 58 62 62 71 76 82 82 87 9O 93 10. ll. 12. 13. LIST OF TABLES Constraints and Assumptions by Alternative . . . . Comparison of Alternatives . . . . . . . . . . . . Population and Employment by County, IPNF Economic Impact Area. . . . . . . . . . . . . Location Quotients for the Forest Products Industry, 1973. . . . . . . . . . . . . . Excess Employment and Percent of Total Excess Employment in Forest Products Industries, 1973 . . Original Data for Input-Output Model, IPNF Impact Area, 1977 (1978$) . . . . . . . . . . Impact Coefficients and Type I Output Multipliers By Sector, IPNF Economic Impact Area (1978$) . . . Employment and Income Changes for Selected Changes In Forest Output, IPNF Impact Area (1978$) . . . . Employment Changes Associated with First Decade Changes in IPNF Timber Management, Alternative 1 . Income Changes Associated with First Decade Changes In IPNF Timber Management, Alternative 1 . . . . . Average Annual Timber Harvest and Forest Service Expenditures by Alternative--Change from 1980 Base Average Annual Change in Employment and Income by Alternative. . . . . . . . . . . . . . . Comparison of Alternatives: Equivalent Annual Value for Fifty Years . . . . . . . . . . 4O 44 53 55 57 66 67 72 74 75 77 79 84 LIST OF FIGURES Average Annual Timber Harvest by Alternative . . . . . Economic Impact Area, Idaho Panhandle National Lumber Production and Harvest by Ownership, IPNF ImpaCt Area, 1972-1980. 0 o o o o o o o 0 Average Annual Employment by Alternative, IPNF Impact Area . . . . Average Annual Income by Alternative, IPNF Impact Area .' vi Forests 46 52 61 80 81 S. bl SE at We CHAPTER I INTRODUCTION The U.S. Forest Service has traditionally maintained an interest in the impact of national forest management on local communities. Until recently, rather less concern has been shown for the economic efficiency of national forest management. The debate over economically efficient forest management centers on the concept of sustained yield, which the Forest Service has interpreted as requiring a nondeclining flow of timber volume from the national forests. Because the concept of local community stability has traditionally been linked with a stable supply of timber, advocates of efficient forest management are suspected of being unsympathetic to local community interests. The rejoinder takes two forms. First, the question is raised whether an even flow of timber is either a necessary or sufficient condition for community stability. Second, even if one could demonstrate that sustained yield does contri- bute to community stability, a question remains about whether the stability gained is worth the sacrifice in efficiency which usually attends it. This research concerns the latter question. Research Problem Local economies dependent on timber resources exist throughout the Pacific Northwest. Many of these areas are also characterized by a predominantly federal land base administered by the U.S. Forest Service. The entire local economy is therefore closely linked to national forest policies which affect the supply of timber from the national forests. Policies, and policy changes such as departure from the nondeclining even flow concept of sustained yield, can have a direct impact on local communities. That impact is one of many which must be considered in evaluating existing and proposed forest policies. Another important consideration for any forest management policy is its economic efficiency. Benefits must be weighed against costs, in terms of both cash expenditures and revenue foregone. The problem considered is how to measure the impact of certain policies on a local economy and how to compare that impact to the cost of achieving it. Whether this impact contributes to a stable community is not at issue, i.e., the concept of community stability provides a general context for this research, but does not constitute the research problem. A case study approach is used: the local economy considered is made up of the five northernmost counties in Idaho. The Idaho Panhandle National Forest (IPNF) is the administrative unit incurring the cost of forest management in the name of, ultimately, the U.S. taxpayer. Research Objectives In order to measure policy impacts on the local economy and compare those impacts to their cost, the following research objectives must be achieved: 1. Develop a model which defines the conditions for maximizing the present net value of timber management on the Idaho Panhandle National Forests; 2. Identify the cost, in terms of present net value loss, of following alternate management policies; 3. Measure the impact of each alternative on the local economy; and 4. Develop a common unit of measure by which local economic impacts can be compared directly to changes in the present net value of timber management on the national forest. In this chapter we will briefly introduce the concept of forest management based on economic efficiency. Efficiency criteria are frequently at odds with traditional volume-oriented forest management policies. We will therefore discuss both the traditional sustained yield - community stability link and the arguments against it as an appropriate land management policy. After demonstrating the problems with current policies, attention can be turned to a more comprehensive discussion of the economic efficiency model and the tOpic of this research. Economic Efficiency Criteria in Forest Management Economic efficiency criteria justify expanding production until the benefits derived from the last unit of output just equal its factor costs. At that point present net value is maximized. In the context of forestry, investments should be made in timber management, silvicultural effort and harvesting only to the point where net timber values just equal costs. There are at least two objections commonly made to this approach on national forest land. First, as a public agency the Forest Service is properly required to practice multiple use management, not to maximize profit. The criteria can therefore be expanded on public forests to include the benefits and costs of multiple use outputs. Evidence from.public lands does not support the rationale that nonpriced values and externalities always justify deviation from a strictly market solution (Fight, et a1. 1978; Kutay, 1977; Walker, 1974). Justification must be provided on a case by case basis, not as a blanket assumption. The second objection to the economic efficiency criteria is that it disregards the impact on local communities. The objection implies that current volume—oriented policies are better for local economies. This assumed link between sustained yield policies and community stability is discussed in the remainder of this chapter. The Sustained Yield-Community Stability Link Understanding the assumed relationship between sustained yield and community stability first requires an understanding of the terms them- selves. The traditional interpretation of sustained yield relates to the maintenance of a flow of harvested timber, and it implies that the harvest should not exceed growth (Waggener, 1978). Smith (1969) contends that the concept of maximum sustained yield was introduced in the mistaken belief that land is more limiting than labor, capital and technology. Under maximum sustained yield, one must therefore promote the greatest possible growth per acre to support the greatest possible harvest per acre. The concept of maximum sustained yield is closely tied to the model of the normal, or regulated forest. The regulated forest, with normally distributed age classes and productivity growth and a fixed rotation age, is theoretically capable of providing a high, constant level of harvest forever. Most forests are not in a regulated condi- tion. The time needed to reach a regulated condition depends on the rate of harvest in the interim. Achieving the desired age class dis- tribution in the shortest time possible could mean large fluctuations in interim harvest levels. The idea of increasing annual or periodic yields was therefore introduced "as an attempt to encourage stability and to encourage an orderly transition to maximum yields" (Smith, 1969). The concept of stability is also ambiguous. In a static sense, stability means constancy. In a dynamic sense, stability can relate to the degree of short term variability about a trend (Waggener, 1977) or the rate of change in the trend itself (Jackson, 1980b). Schallau (1974) suggests the term "orderly change," the absence of sudden and unpredictable changes. Beuter and Schallau (1978) expand on that approach and suggest that stability can be achieved whenever both basic and nonbasic sectors of an economy are changing in the same direction and at comparable rates so they remain in balance. The latter defi- nition offers a reasonable approach to a dynamic economy. Instead of managing for maximum sustained yield, forest managers might endeavor to keep the total flow of timber in balance with the rest of the economy. The Forest Service has opted for sustained yield, however, in its strictest form: nondeclining even flow. The Forest Service has operated under the timber harvest policy of nondeclining even flow since the enactment of Emergency Directive 16 in 1973. Under this policy allowable harvests of timber for each national forest are set at a level which can theoretically be sustained forever. As Josephson (1976) has pointed out, the policy reflects the Forest Service interpretation of legislative requirements contained in the Organic Act of 1897 and the Multiple Use-Sustained Yield Act of 1960. It was reiterated in the Forest and Rangeland Renewable Resources Planning Act of 1974 as amended by the National Forest Management Act of 1976.1 Josephson states that the even flow policy is believed to repre- sent a means of achieving "stable forest-based communities and long run conservation of resources." This concern for "stable forest-based communities" has a long history. Schuster (1976) has traced a Forest Service concern for com- munity stability to as early as the 1905 Pinchot letter.2 Legislation 1Popovich (1977) points out that NFMA Section 13 limits average harvest in any decade to that which can be removed on a sustained yield basis forever. However, some flexibility is added by the caveat that the Secretary of Agriculture may depart from the constraint "in order to meet multiple-use objectives." Walker (1977) has argued that the inclusion of economic criteria in the definition of multiple use would justify departure. The 1974 RPA, as amended by NFMA, also includes several provisions for the cost efficient reduction of timber waste. Zivnuska (1977) suggests waste reduction and efficient use of capital could serve as multiple-use objectives warranting departure. Finally, Zivnuska has pointed out that where private timber stocks have been depleted, departure could serve community stability goals better than nondeclining even flow. 2The letter, dated February 1, 1905, was from Secretary of Agriculture James Wilson to Chief Forester Gifford Pinchot. The letter was prepared by Pinchot himself and set down the guides and charter for the new forest agency. The body of the letter is included in Pinchot's Breaking New Ground (Harcourt, Brace and Co., New York, 1947). linking sustained yield and community stability has been limited, however, to the Sustained Yield Forest Management Act of 1944 and the "O & C" Act of 1937.3 The Sustained Yield Forest Management Act takes community stability as the raison d’etre for sustained yield forest management. The act states that "In order to promote the stability of forest industries, of employment of communities, and of taxable forest wealth, through continuous supplies of timber; in order to provide for a contin- uous and ample supply of forest products; and in order to secure the benefits of forests in maintenance of water supply, regulation of stream flow, prevention of soil erosion, amelioration of climate, and preservation of wildlife", the Secretaries of Agriculture and Interior were authorized to form sustained yield forest units. Section 3 of the act also allowed deviations from the usual timber sales procedure if "the maintenance of a stable community or communities primarily dependent upon the sale of timber or other forest products" was at stake. Similarly, the 0 and C Act stated that the forest was to be managed "in conformity with the principle of sustained yield for the purpose of providing a permanent source of timber supply, protect— ing watershed, regulating streamflow, and contributing to the economic stability of local communities and industries . . ." Despite the absence of other legislative references to community stability, Jackson (1980b) notes that the Forest Service has interpreted "more frequent reference to even flow as Congressional intent to stabilize communities." Thus the rationale for sustained yield in general and nondeclining even flow in particular has become almost synonomous with the desire for stable communities. 3The O and C Act of 1937 is officially titled the Revested Oregon and California Railroad and Reconveyed Coos Bay Wagon Road Grant Lands Act of 1937. Critique of the Sustained Yield—Community Stability Link Waggener (1978) has stated that "It is one thing to define worthwhile objectives for public policy and forest policy in particular. It is quite another to assure that the means selected for accomplishing the objectives are actually effective and efficient. Unfortunately, the causal linkage of sustained yield management as the means of accomplish- ing stability objectives has been one of assertion rather than a careful analysis of actual viability." The problem is that most of the causes of instability lie elsewhere. The timber industry itself is rather unstable. Unstable markets, the existence of excess timber inventories and the use of forests as a common property resource have all contributed to instability in forestry over the years (waggener, 1978). Additionally, there is evidence that employment in the forest products industry is declining due to capital substitution, despite relatively even flows of timber (Stevens, 1979; Stier, 1980). The chief problem with nondeclining even flow is that it is a static policy in a dynamic world. Keeping one factor constant simply shifts the burden of adjustment elsewhere. Waggener (1978) has pointed out that "treating the forestry symptoms of economic instability rather than the underlying causes can be counterproductive." Such policies can inhibit the development of a more diversified economy. Furthermore, stabilizing output from the national forest forces other forest owner— ships and mill owners to assume the entire burden of adjustment to changing levels of demand. Jackson's (1980b) study of Montana and northern Idaho provides empirical evidence to support that observation. Jackson examined timber sold, timber harvested, and forest products employment in the study area since 1959. He found the variation in sales and harvest nearly identical, but employment more stable. Other ownerships and purchasers were providing the balance. Price fluctua- tions are also aggravated by an inelastic timber supply. In addition, because the Forest Service controls sales rather than actual harvest, timber purchasers frequently hold increased inventories of uncut timber to provide flexibility in responding to changing market conditions. Thompson (1966), waggener (1969), and Keane (1972) have all pointed out that in a dynamic world, nondeclining even flow cannot guarantee community stability. Indeed, Krutilla and Haigh (1978) have stated that ". . . it is a bit quixotic for the Forest Service to attempt to insure 'community stability' when the means to do so are not available to it." Others have provided support for Krutilla and Haigh's argument. Bentley (1968) discusses federal sustained yield units, where stability is a primary concern. His findings show stagnation in the local area and a sacrifice of both growth and stability in the region. He further suggests that where the stability goal is achieved, it is the result of performance by firms purchasing national forest timber. In another study, Jackson (1980b) compared employment stability to the proportion of total growing stock under national forest control in 27 states. He found that an increase in the proportion of national forest control is associated with a decrease in employment stability. While this does not prove that national forests cause employment instability, it does raise questions about the ability of the Forest Service to ensure stable communities. 10 One can agree with Josephson's (1976) comment that boom and bust cycles have great economic and social costs. On the other hand migration and change are a standard part of American economic growth. Improved transportation, technological improvements and economic diversity have all reduced the importance of even flow harvests. Given the prepon- derance of evidence to the contrary, the burden of proof lies with the Forest Service to show that the sustained yield policy of nondeclining even flow is either necessary or sufficient for community stability.4 Given that most of the evidence suggests it is not within the power of the Forest Service to ensure community stability, it becomes doubly important to consider the wisdom of volume-oriented policies. Hyde (1980) summarizes the case against the volume-oriented sustained yield policy as a means of achieving community stability: "Since our concern is for human communities, we might expect focus on the human productive resource, labor, and flows of its direct use. Instead, the Forest Service acts to prevent community decline by ensuring periodic harvest flows. For communities maintained by a timber resource from an inefficient land base, this is the same as an extended subsidy for which there is no obvious end and for which someone (the public treasury) must pay. Subsidies imply foregoing other nonsubsidized goods or services which the subsidy dollar could have purchased, and they are inflationary. They may be justified, but justification requires a conscious public policy decision. It is incumbent upon Forest Service managers and others concerned with the community impacts of timber harvests to make the case for such decisions, because there is no guarantee that a subsidized timber flow will succeed in preventing community decline." In addition to Hyde's concern for subsidies brought about by timber harvests above what could be efficiently supported by the land 4Perhaps in response to this shifting burden of proof, Worthington (1975) has suggested the rationale for nondeclining even flow is moving away from community stability and toward the conservation of resources for future generations. 11 base, there is an additional concern for harvests lower than what the forest could efficiently provide. A recent study on the Six Rivers National Forest (USDA, 1979) found that a moderate departure from nondeclining even flow would increase the allowable sale quantity, local jobs, revenue to the counties and returns to the U.S. Treasury. As stated earlier in this chapter, the focus of this research is local economic impact, not community stability per se. Many questions have been raised about the meaning of the term community stability and the ability of the Forest Service to affect it. This research concen— trates on the measurable impacts of forest management on local income and employment. The procedure developed here can provide information on which a "conscious public policy decision" can be based. The first set of questions to be answered is "What forest manage— ment criterion is best for the local economy?" "Is a policy of maxi- mizing the efficiency of national forest management better or worse for the local economy than a subsidized policy of nondeclining even flow?" Or is some intermediate policy possible? If a policy of subsidy is selected to benefit the local economy, one can join Clawson (1976) in saying that "while subsidies are very common in the national economy, question can always be raised as to the degree of national interest in such local subsidy." Major Findings Among the major findings of this study are the following: 1. The impact on the local economy of deviating from a model of efficient timber management depends on "how much" and "in what 12 direction" the movement occurs. Policies which keep the harvest above efficient levels and management practices which increase Forest Service expenditures are advantageous to the local economy. Policies which keep the harvest below efficient levels and management practices which reduce Forest Service spending are locally disadvantageous. 2. Environmental considerations can fall anywhere in the spectrum with regard to both efficiency and local economic impact. Practices which increase the cost of timber harvest without reducing timber volume can benefit the local economy, but reduce the present net value of timber management. Policies which lead to a reduction in timber harvest to a more efficient level might improve efficiency but have negative impacts on the local economy. 3. In all cases considered in this analysis gains to the local economy were less than the present net value loss which occurred when alternatives to the model of efficient timber management were followed. Comparing local benefits to national costs for each of three alter- natives, all three had benefit-cost ratios less than one; one ratio was less than zero. Deviations from the model of efficient timber management for the purpose of promoting local economic benefits did not make a positive net contribution to the national economy. Other results might be possible on other national forests, given different management options and different local economic conditions. CHAPTER II PURPOSE, SCOPE AND RESEARCH PROCEDURE This research will present a method for determining what effect various forest management alternatives are likely to have on a local economy and at what cost that effect is achieved. As Dickerman and Butzer (1975) have pointed out, it is inappropriate to generalize the role of timber industries in local or regional economies. They found that even among regions where direct impacts were similar, indirect impacts might be quite different. In the Pacific Coast region, for example, the forest products industry represents 7 percent of the direct personal income and is associated with 17 percent of total personal income. By way of contrast, western Montana forest products industry accounts for 6 percent of the direct and only 10 percent of the total personal income in the area. Because of the linkages in the Pacific Coast economy, a 20 percent change in timber volume would change the regional economy by 3.0 percent, other things being equal. In western Montana it would take a 30 percent change in timber volume to produce a 3.0 percent impact on the economy. Because local economies differ, their response to alternate forest management programs cannot be simply assumed. Purpose of the Research The purpose of this research is to test the hypothesis that adher- ence to a model of efficient timber management will not only maximize 13 14 the present net value of the timber but will also maximize the present net value of local economic activity. Conversely, adherence to policies such as nondeclining even flow reduce the present value of local economic activity. In the event the hypothesis proves incorrect, we can determine why less-than-efficient management might be good for the local economy. Using the procedure presented here, we can also determine the amount of subsidy provided the local economy and suggest whether there might be better options for maintaining employment. Scope of the Research The research takes the form of a case study of the Idaho Panhandle National Forests. Located in the northernmost part of Idaho, the IPNF is an administrative unit for three designated national forests: the Kaniksu, the Coeur d'Alene and the St. Joe. The analysis will consider the costs and benefits of four manage- ment alternatives for the IPNF. Although the focus will be on timber management alone, inferences can be drawn about the effect of including multiple use management. The local economic impact area is comprised of five northern Idaho counties: Benewah, Bonner, Boundary, Kootenai and Shoshone. Their borders are roughly coincident with the national forest boundary. The impact of each alternative will be measured in terms of employment and income. The planning horizon for the management alternatives considered is one hundred thirty years, which is sufficient time for the Forest to reach a fully regulated state. This analysis will concentrate on the 15 first fifty years, capturing most of the present net value of the timber management program and of local economic impacts. Research Procedure Subsequent chapters report the research procedure in sequence. In Chapter 3, the theoretical framework for the research is explained. First, an economic efficiency model formulated by William Hyde (1980) is presented. Solution of the model provides an economically optimal timber management regime, i.e., one which maximizes the present net value of management. The solution specifies optimal levels of land allocation, silvicultural effort and timber harvest schedule. The results of Hyde's application of the model are discussed. In Chapter 4, another version of the efficiency model is presented. It was formulated by the Idaho Panhandle National Forests planning team. The computer model FORPLAN, which is used to solve the efficiency model, is also described. Like Hyde's model, the FORPLAN solution defines an optimal land allocation, level of silvicultural effort and timber harvest schedule. Chapter 5 first presents three alternatives to the efficiency model. Two of the alternatives produce a higher timber volume in the first decade than the efficiency alternative. In addition, they include several constraints on efficient timber management, including nondeclin— ing even flow, harvest at culmination of mean annual increment and 40 acre maximum clearcut restrictions. Another alternative represents current timber management, and produces a timber volume lower than the efficiency alternative. After all of the alternatives are described, their solutions are compared to the efficiency model solution. 16 Comparisons are made of the present net value for each alternative, their timber volume and scheduling, land allocation and several silvi- cultural and production factors which affect costs. The efficiency of national forest management is reflected by the present net value of each alternative. Chapter 6 turns attention toward the local economic impact area. A profile of the impact area is presented. Then the relationship between the IPNF, the local timber industry and the total economy is described. The input-output (I-O) model used in this research is described in Chapter 7. First the model formulation is discussed, in the context of forward- and backward-linkage I-O models. The model is used to estimate the impact of the forest management alternatives on local employment and income. The alternatives discussed in Chapters 4 and 5 are then compared for their impact on local economic activity. Chapter 8 summarizes the results of the analysis and presents conclusions. Joint comparisons are made between the alternatives. The present net value of each alternative is a measure of efficiency. The income produced in the local economy is a measure of the economic benefits which accrue to the community. Both measures are discussed in terms of average annual equivalent values. Conclusions are presented in terms of how movements away from the efficiency model tend to add to or detract from the local economy and how subsidies, where they exist, can be evaluated. CHAPTER III DEVELOPMENT AND APPLICATION OF THE EFFICIENCY MODEL The U.S. Forest Service is the nation's largest timberland manager. Its timber sale policies are guided almost solely by consideration of the volume produced, not its value. As Mead (1966) has pointed out, the objectives of the Forest Service are detached from economic factors. Their objective is to "manage each working circle so that it will produce a maximum sustained yield of the products it is best suited to grow. This can be accomplished by selecting a rotation which coincides with the culmination of mean annual increment for the desired products and then regulating the cut so as to achieve, as soon as practi- cable, the annual or periodic removal of the proper volume." The allowable cut model therefore spreads the harvest of mature timber over several decades, smoothing out the flow of timber and preventing a "falldown" in future harvestable timber. The nondeclining even flow policy further restricts the harvestable volume in each year. The requirement to harvest at or beyond the culmination of mean annual increment similarly focuses on the volume of timber produced, rather than its value. Clawson (1976) has estimated that these and other departures from efficiency have an annual opportunity cost of six hundred million dollars. If an adequate economic model exists, the reasons for its prefer- ence over volume-maximizing policies are several. Such volume-maximizing policies are, to begin with, probably more restrictive than are legally necessary (Krutilla and Haigh, 1979; Popovich, 1977). Multiple-use 17 18 purposes might be just as well, if not better, served by a harvest schedule based on efficiency criteria (Hyde, 1980; Kutay, 1977; Calish, et al., 1978). More price stability can be gained when the timber volume offered is price responsive (waggener, 1969) and recent all-time- high lumber prices have been aggravated by Forest Service volume-oriented policies (Craig and Keane, 1977). Efficiency considerations in manage- ment are required by the 1974 Resource Planning Act, as amended by the National Forest Management Act of 1976. Efficient National Forest management is also a concern of the current Presidential Administration (MacCleery, 1982). One question then is: Does an adequate economic model exist? The Conceptual Efficiency Model Samuelson (1976) has pointed out that such noted economists as Fisher (1930), Hotelling (1925), and Boulding (1935) tried--and failed-- to specify the economic model which correctly predicts "when a tree should be cut." This, despite the fact that Martin Faustmann had in 1849 formed an "essentially correct solution." Faustmann's (1849) solution was to maximize the present discounted value of net cash receipts, excluding explicit and implicit land rents, calculated over an infinite number of rotations. Samuelson demonstrates that an equivalent formulation maximizes the present discounted value of net receipts for the first rotation only, but with land rent included as a receipt. More recently, other models have been advanced which build on Faustmann's model. walker (1971) has proposed the Economic Harvest Optimization Model (ECHO), which generates the timber harvest schedule 19 maximizing the present value of future timber sale income. Berck (1979) has formulated an economic model in which stumpage price is determined endogenously, rather than exogenously as in most models. For the purposes of this analysis, Hyde's (1980) discussion of the economic efficiency model is most useful. After reviewing his presentation of the conceptual model, we will briefly summarize his results with the applied model. In his Timber Supply, Land Allocation and Economic Efficiency (1980), William Hyde builds on the Faustmann capital theory model. He first presents the conceptual model defining efficient timber production for the competitive firm with a fixed land base. Variable inputs are time, i.e., the length of the production process, and silvicultural effort. At this stage, the conceptual model assumes a homogeneous land base with constant returns to scale for the fixed factor. The concep- tual model can be stated as v = max [(p-x> Q (T,E) e"rt - wEJ<1 - e‘rt>‘1 T,E Where: V a present value T = time; the production period, or rotation age in years silvicultural effort, or all factors of production other than time and land volume of wood fiber, or harvest volume stumpage value access and logging, or extraction, costs the discount rate the cost of a unit of silvicultural effort ['11 ll SHN’UO llllllllll and (1 - e'rt)’1 transforms all to an infinite series. This is recog- nizable as the Faustmann formula, and rV is equal to soil expectation value. Hyde uses the conceptual model to demonstrate that 20 1. If the optimal rotation age T* is held constant, then maximum economic returns occur at the level of silvicultural effort E* where total revenues are in the greatest excess of factor costs, i.e., where decreasing marginal revenue product equals the unit factor cost. 2. If the optimal silvicultural effort E* is held constant, the optimal rotation age T* occurs where the declining marginal revenue product equals the increasing opportunity cost of delaying harvest. 3. When E* and T* are defined, the economically optimum harvest volume 0* is also defined. To summarize, efficient landowners seek to maximize the present value of timber production rather than maximize timber volume. Optimal timber volume is produced from the combination of inputs and timing which maximizes present value. That combination is found where the cost of the last unit of silvicultural effort equals the value of additional product, and harvest is delayed until that moment when the gains from additional delay are exactly offset by the net additional cost of delay. Application of the Conceptual Model Hyde goes on to apply his analytical model in two case studies. The results of his analysis are discussed here for two reasons. First, the results provide some insight into the changes in timber management which result from applying a value-maximizing vs. a volume-maximizing strategy. How do rotation lengths differ? Are fewer acres devoted to timber management? Does silvicultural intensity increase or decrease? Second, Hyde points out the opportunity cost associated with certain 21 public timber management policies. His analysis provides an appropriate background for understanding the implications of this research. The first case study is a general case for the Douglas-fir region of the Pacific Northwest. Short- and long-run timber supply is an important policy issue in the region. Hyde produces long-run supply projections based on best management practices current in 1975. His factor costs and timber yields vary for six site classes (1+ to V), five levels of silvicultural effort (sequentially more intensive effort from.volunteer stands through planting, thinning, fertilizing and using genetically improved seedlings), and three ownership classes (public, industrial and nonindustrial private). By looking at a vector of expected timber prices, Hyde produces a series of points which together define the annual timber supply for a given site, silvicultural process and ownership. By repeating the process for all five levels of silvicultural effort (for a given site and ownership) and choosing the option with the greatest present value at each price, he produces a long-run supply curve for that site class. To obtain aggregate regional supply he multiplies the annual harvest level at each price times the number of acres in that site class, repeats the process for all site classes and adds them to produce the supply schedule for each ownership. Finally, he accumlates across all ownerships to obtain the regional supply schedule. Hyde's results from examining the long-run regional supply schedule support his basic production and supply formulations. Some site class, ownership and silvicultural combinations become profitable at very low timber prices. As prices rise, the level of silvicultural 22 intensity and number of profitable timber-producing acres increase. As land quality decreases, the optimal level of silvicultural intensity decreases also. Hyde concludes that it "may be good practice to inten- sify management on good sites long before poorer sites receive even minimal attention." Hyde also found that there is a direct relationship between road and logging system access costs and the optimal rotation age, i.e., as the cost of access increases, it becomes profitable to delay harvest longer. An inverse relationship exists between access cost and silvi- cultural effort. As the cost of access increases, the net value of stumpage can cover only low to moderate silvicultural treatment costs. An important additional conclusion is that access cost can be a partic- ularly important variable on public lands. Since public lands in the West tend to be less accessible than private lands, the optimal level of silvicultural effort on public lands would generally be lower than on private land of the same site class. Similar conclusions were reached by this author's analysis of the Idaho Panhandle National Forests' management alternatives. Those results will be discussed in Chapter 5. Completing his analysis of the Douglas-fir region case study, Hyde identifies the average annual harvest in the region as 24-26 million cunits (2.4-2.6 billion cubic feet). Assuming a $140 per cunit price plus his real rate of price increase, Hyde estimates the potential annual long-run harvest is 42 million cunits. The greater potential harvest levels are a function of an assumed increased biomass utili- zation and widespread conversion from volunteer stands to more 23 intensive management. In essence, the increase is due to changes in technology and a shift from volume maximization to efficiency maximi- zation, including the more rapid harvest of the region's old growth stands.4 Hyde further demonstrates that even if multiple-use considerations preclude all but the least intensive timber management on public land, regional long-run annual harvest could exceed 36 million cunits, a 44 percent increase from the present. This supports his contention that substantial gains in both volume and value are possible by moving to efficiency criteria. Hyde's second case study is the French Pete Creek drainage on the Williamette National Forest. The drainage is composed of about 19,200 acres, of which 18,600 acres are roadless. The area contains about 700 million board feet of standing timber, most of which is mature timber 100-400 years old. The area also offers unique recreational oppor- tunities and has been considered for backcountry recreation or wilder- ness designation. Hyde examines the effect of three public timber management constraints--even flow, sustained yield and harvest at culmi- nation of mean annual increment--on the value of standing timber and the value of long-term timber management. His purpose is to draw conclusions about the necessary value of the recreation opportunity in order to justify preemption of timber for recreational use on efficiency grounds. 4The projected harvest is not an expectation of what will actually occur. Instead, the available supply would reduce the market clearing price, or some producers would not find it profitable to adopt efficient production technology. Klemperer (1976) reminds us that strict adher- ence to the economic model where there are excessive reserves of old- growth could lead to short- and long-run economic, social and environ- mental dislocations. Those costs would have to be weighed against gains from faster liquidation. 24 The unconstrained net value of existing timber in the French Pete drainage is estimated at $116-147 million, assuming a 10 percent discount rate and immediate harvest over a period of five years. This is the equivalent of an annual rent of $11.6 to $14.7 million in perpe- tuity. For French Pete's 18,600 acres, this amounts to a present value of up to $7903 per acre and an equivalent annual rent of $623-790 per acre. This value does not include a cost for reforestation. Since the benefits derived from a regenerated stand would not cover the costs of establishment, present value is maximized by "mining" the timber, i.e., harvesting the existing stand without providing for regeneration. As Hyde points out, the 1976 National Forest Management Act limits the harvest of standing inventory "for the ostensible purpose of guar- anteeing long-term timber supply and ensuring the economic stability of local communities dependent on public timber harvest flows." As applied by the Forest Service, the law emerges as the policy of nondeclining even flow, wherein average annual harvest must be stable or increasing in perpetuity. When applied to French Pete, the policy extends the liquidation period for existing stands to 241 years. Holding the timber for that time reduces the net value to less than zero: -$9.4 million. In effect, the even flow policy absorbs the entire efficiency-derived value of the existing timber.6 The land would be more efficiently allocated to nontimber uses such as recreation. 6Berck (1979) had somewhat similar results from the application of his model to the Douglas-fir region. Opportunity losses from holding old-growth timber an extra 50 years averaged $6000 per acre, or 45 percent of the total timber value. 25 Hyde's conclusion is that social welfare might be better served by altering the even-flow policy and harvesting according to efficiency criteria. Exploring this option, two other constraints are considered. First, the option for timber mining is withdrawn. Second, a harvest timing constraint is added. Timber mining is prohibited by the 1976 National Forest Management Act and violates the intent of the original forest reservation system.7 Harvest on national forest lands is allowable only when adequate regen— eration can be assured. Hyde considers three management alternatives consistent with that philosophy--custodial management, statutory wilder- ness management and permanent, sustainable timber management. Timber management is justified where net timber values are positive and in excess of other (in this case wilderness recreation) values. His conclusion is that timber management might be justified on 15,146 acres in the drainage. At a market price of $150 per cunit, present value of timber management on regenerated stands is $877,600. The equivalent annual rent at 10 percent is $87,760, or $5.79 per acre per year.8 Hyde then analyzes the impact of constraining timber harvest rotations to minimums of 80 and 100 years. Eighty years approximates the volume maximizing age; one hundred years is a more common rotation 7The Organic Administration Act of 1897 (30 Stat. 34, 35, 36) provided for the creation of National Forests and empowered the Secretary of Agriculture to make such rules and regulations as neces- sary to "preserve the forest thereon from destruction . . ." 8The change in present value from the $116-147 million of the existing stand to less than $1 million for perpetual management is not all attributable to the permanent timber management constraint. The value of the existing stand was estimated with regional average costs. The perpetual management option used locally specific costs, which in most cases greatly exceeded the regional average. 26 for Forest Service managed Douglas—fir. Results indicate that the present value of timber management in French Pete is negative for rota- tions one hundred years or longer. Under eighty year rotations, 15,146 acres could be managed for a present value of $26,236. The additional opportunity cost of applying the 80 year rotation constraint to the permanent timber management solution is $851,364. Hyde concludes that, with current recreation use at 2000-3000 visits per year and a 2 percent annual growth rate in use, the net recreation value of custodial or wilderness management exceeds the constrained timber value. Hyde's empirical results from application of the conceptual efficiency model support several conclusions which are relevant to this research. In summary: 1. As prices rise, the level of silvicultural intensity and number of profitable timber-producing acres increases. 2. As land quality decreases, the optimal level of silvi- cultural intensity decreases. 3. High access costs extend the optimal rotation age and reduce the optimal level of silvicultural effort. 4. Three public timber management constraints--even flow, sustained yield and harvest at culmination of mean annual increment-- can significantly reduce or eliminate the positive present net value of timber management, even on productive sites. In his final remarks concerning the French Pete case study, Hyde states that he finds "no intuitive reason why unspecified community impacts should alter conclusions about allocation of forestland within French Pete." The remainder of this research focuses on another case 27 study--the Idaho Panhandle National Forests. An attempt is made to ascertain whether certain specified community impacts-—on employment and income--fare better under volume maximizing or efficiency maximizing management strategies. The harvest schedule under each strategy is developed using the FORPLAN linear programming model. CHAPTER IV THE IDAHO PANHANDLE NATIONAL FOREST EFFICIENCY MODEL Understanding the IPNF formulation of the efficiency model requires an understanding of the computer model used in forest planning. In this section we will look first at the general computer model, then at how it was structured to form the efficiency model. The IPNF uses the linear programming model FORPLAN (Johnson, et al.,1980) to estimate the results of following various management strategies. The objective function may be specified in a number of ways, including maximize present net value, minimize cost or maximize (minimize) some output such as timber, water yield or big game habitat. Right hand side values may be specified for all outputs; constraints may be applied to restrict certain activities and areas, such as the number of acres receiving regeneration harvest in a given period; constraints may be applied to restrict harvest to nondeclining even flow; a sustained yield link is available to assure sustained yield beyond the planning horizon. The FORPLAN model may be run with as few or as many constraints on the solution as desired. Like Hyde's efficiency model, the FORPLAN model may include secular price increases, price variations by diameter, multiple harvests, silvicultural effort subsequent to planting and distinction among site classes. 28 29 The FORPLAN Model The FORPLAN data base consists of management prescriptions of varied emphasis and intensity, analysis areas, economics tables, and yield tables. Each management prescription is a combination of manage- ment activities which achieves a desired result on the ground. Analysis areas are homogeneous land areas to which management prescriptions may be applied. Yield tables associated with each output (timber, wildlife, etc.) indicate the results of applying a given prescription to a given analysis area. Economics tables reflect associated costs and benefits. Management Prescriptions The IPNF model includes 30 basic prescriptions. For our purposes they fall into four general categories, all of which represent some degree of multiple use. Timber prescriptions emphasize timber management. Such activities as recreation trail maintenance and transitory grazing are permitted, but do not affect timber volumes or harvest scheduling. For this analysis, the cost of these nontimber activities has been removed from the calculation of present net value. Compromise prescriptions include some sacrifice of timber, wild- life, visual quality and/or recreation potential. Certain visual/timber prescriptions, for example, require wide road spacings which increase logging costs. In general, the compromise prescriptions are less efficient timber producers than the timber prescriptions. Nontimber prescriptions do not allow any programmed timber harvest. They include wilderness management; certain administrative, recreation 30 and cultural site management; permanent range; and research forests. They apply to specific areas and are held fixed in the solution. The maintenance prescription is a special case of the nontimber group. This custodial managgnent prescription applies wherever the marginal costs of management exceed marginal benefits, unless the area is needed to meet right hand side targets for some output. Management intensity is a function of the management prescription. For timber prescriptions, intensity varies by the number of commercial thinnings permitted (zero to three), the occurance of precommercial thinning, the silvicultural system (clearcut, shelterwood, group selec— tion), and the percentage of the harvested area planted. Analysis Areas The IPNF model includes 493 analysis areas. Analysis areas are homogeneous, but not necessarily contiguous, land areas. The unit of measure is acres. Homogeneity is defined by six criteria: Level 1 Kaniksu, Coeur d'Alene or St. Joe National Forests. Level 2 Roaded or roadless; RARE II Further Planning Areas; or areas set aside for specific purposes (for example administrative areas and designated Wilderness). Level 3 Big game winter range; nonwinter range; or riparian areas. Working Group Habitat-type groups Cedar/Hemlock/Pachistima; Grand Fir/Pachistima; Alpine Fir/Pachistima; All Other suitable timber types; or Unsuitable timber. Land Class Combinations of slope class ((.4OZ or>l40%) and soil sensitivity (sensitive or nonsensitive). Condition Class The condition class represents the average age of the existing stand, or in some cases expresses the average age for trees of a given diameter. Timber age class 31 divisions include mature sawtimber in need of rehabili- tation (age 150 yrs.), mature sawtimber (100 yrs.), immature sawtimber (80 yrs.), poletimber (50 yrs.), stagnated stands (40 yrs.), seedling-saplings (20 yrs.), riparian zones (mixed age), and nonstocked suitable timber land. Noncommercial forest land, unsuitable forest land and nonforest are not available for timber management. The combination of 30 basic prescriptions and 493 analysis areas yields a total of about 3000 prescriptions to be considered in a FORPLAN solution. Some combinations, such as intensive timber management on unsuitable forest, are not included. Economics Tables The economic tables (Hall, 1982a; 1982b) contain the timber costs and benefits associated with each prescription.9 Road costs vary from zero to over $900 per acre. They are relatively site specific and depend on the average existing road density of the analysis area, the desired road density for the prescription and the average slope and soil sensitivity of the analysis area. Linear (local) road costs are incurred when the first harvest entry occurs. Nonlinear (arterial and collector) road costs are not a linear function of the number of acres harvested. Substantial costs are incurred as soon as a new area is entered. In order to allocate costs to all acres which eventually benefit from the road, nonlinear road costs are charged against all mature, immature and poletimber stands in the first and second decades and against seedling-sapling stands in the third and fourth decades, regardless of initial entry period. 9In the IPNF model formulaton, nontimber benefits appear in rows and columns appended to the FORPLAN matrix. Nontimber costs are included as an output category and appear on separate yield tables. Neither is 32 Site preparation costs range from $147 to $553 per acre. Methods and costs vary by silvicultural system and land class, and by the requirements of the prescription. The timber prescriptions are gen- erally less expensive than the compromise prescriptions. Reforestation costs vary by prescription intensity and silvi- cultural system, from $40 to $80 per acre. Site preparation and planting costs for nonstocked lands vary from $251 per acre on the Kaniksu and Coeur d' Alene to $642 per acre on the predominantly south slope St. Joe brushfields. Precommercial thinning for $136 per acre applies in some prescrip- tions. Sale administration and sale preparation combined average $197 per acre on final harvests; slightly higher for intermediate entries. All other timber management costs are included in an overhead category and allocated to all forest acres. Stumpage values appear as dollars per thousand cubic feet (mcf) and vary by habitat type, diameter class and logging system mix, where logging system mix is a function of analysis area land class and the road density required by the prescription. The stumpage value equation is a regression equation based on a procedure suggested by Jackson and McQuillan (1979) and developed for the IPNF by Merzenich (n.d.). It has the form: Y = -287.43 + 0.7743x1 - 0.5153x2 - 0.7873X3 + 80.55x4 included in the calculation of present value for this analysis, although they are normally part of the FORPLAN objective function. 33 Where: Y a high bid value x1 = weighted average lumber price, lumber tally x2 = percent of volume jammer logged x3 = percent of volume skyline logged x4 - the sum of the natural log of each dbh class times the total net sale volume in each class. Stumpage values are further refined to reflect predicted real price increases to the year 2030 (Adams and Haynes, 1979). Separate real price trends are applied to timber prices (lumber price, lumber tally) and production costs (all logging and milling costs plus a margin for profit), and an adjustment is made for changes in overrun. The resulting stumpage value change is dependent on the site specific factors affecting the initial lumber price and production cost (Merzenich, n.d.). Yield Tables Yield tables provide the link between management prescriptions and outputs. For this analysis, only the timber yield tables are relevant. Timber yields used in the IPNF model are based on projections of Stage's growth prognosis model (Stage, 1973). Projections of average diameter and volume are made by decade for both intermediate and final entries. Yields vary by habitat type and silvicultural system, and are generally higher for regenerated stands than for existing unmanaged stands. Formulation of the Efficiency Model The starting point for this analysis is the management alternative which maximizes the economic efficiency of timber management. Like Hyde's efficiency model, it assumes the manager's objective is to maximize the present value of timber production, given variable inputs of land, silvicultural effort and time. The FORPLAN objective function 34 is to maximize present net value; that is, to maximize the excess of discounted benefits over discounted costs. Of the management alter- natives evaluated by the IPNF, this one most closely approximates the efficient solution, relatively unconstrained by nontimber considerations and national timber management policies. For the most part, the model is consistent with Hyde's efficiency model, although a few differences exist. Restrictions on the model which cause deviations from the true efficiency model will be noted in this section. The model uses the 4 percent real discount rate called for by the Forest Service Manual (FSM 1970), whereas Hyde's analysis used 10 percent. The four percent rate approximates the real rate of return on new private capital investment for recent years (USDA, n.d.), and therefore represents the opportunity cost of diverting resources from private use. The planning horizon is 130 years, or 13 ten year periods. A sustained yield link and ending inventory constraint require sufficient inventory in the 13th period to support sustained yield beyond the planning horizon. The 130 year planning period captures over 98 percent of the present value of timber management and its use should not substan- tially affect the results. Berck (1979) has used a similar planning horizon in the application of his model. No right hand side targets are set for any output. No management restrictions are in effect beyond those provided in the standards and guidelines for each prescription. A degree of risk is accepted that all requirements of the NFMA regulations (Fed. Reg., 1979) might not be met. Specifically, water quality might deteriorate in some watersheds, 35 caribou10 could be adversely affected, and certain old-growth dependent wildlife species might fall below minimum viable populations. Harvest at or following culmination of mean annual increment (CMAI) is not built-in to this alternative. Although the model is not free to schedule a stand for final harvest in all periods, the range of choice is greater than under other alternatives. Existing stands may be harvested as early as age 60 in most cases. Regenerated stands may not be harvested until age 90. Few of the existing stands were actually scheduled for harvest in their first period of eligibility, but almost all the regenerated stands were harvested at age 90. This suggests that the financial rotation is shorter than 90 years. Present net value of the prescriptions might therefore be underestimated. The underestima- tion should not be serious. Christopherson and others (1978) have determined optimal rotation ages for various regenerated stands in Idaho. At a five percent real discount rate, many stands maximized Soil Expectation Value (SEV) at over 100 years. Optimal rotations are not as short as the 50-60 year rotations found in the Douglas-fir region. Long-term timber management is built-in to all prescriptions which harvest timber. The present net value of each prescription is the sum of PNVs for both existing and regenerated stands. Regenerated stands with a negative PNV might therefore be managed for timber production if the value of the existing stand is sufficient to offset the loss. The policy meets the requirements of the 1960 Multiple-Use Sustained—Yield Act and the 1976 NFMA, but violates the assumption that investments 10Caribou are listed by the State of Idaho as a sensitive species. USFS policy is to treat State-designated sensitive species the same as Threatened and Endangered species. 1! 36 should be undertaken only when marginal benefits exceed marginal costs (Hyde, 1980; O'Toole, 1979). Present net value of each alternative would be higher without this requirement. As noted earlier, some nontimber prescriptions are fixed in the solution. Designated Research Natural Areas, for example, are not available for timber management. Present net value of each alternative would be slightly higher without this restriction. All prescriptions included in FORPLAN are multiple-use prescrip- tions. They include some nontimber costs and benefits. For this analysis, the nontimber costs and benefits have been eliminated from the calculation of present net value. They did, however, affect the original land allocation under each alternative. Any allocation shifts due to nontimber costs and benefits appear to be minor. In most cases where the timber prescription has a positive PNV for timber management alone, it exceeds the PNV of the best timber/nontimber compromise, with or without nontimber costs and benefits included. The model assumes a horizontal demand curve for timber. The assumption of total price elasticity of demand has been questioned and procedures for developing Forest-specific downward sloping demand curves have been suggested (Connaughton, n.d.; Jackson, 1980a; Walker, 1971). Because the IPNF appears to be operating on the elastic portion of its demand curve (USDA Forest Service, 1982c), and because none of the suggested alternatives can boast a greater degree of statistical relia- bility, the horizontal demand curve was accepted. This is a comfortable assumption for all harvest levels not far outside the range of current harvest; it becomes less so as harvest levels increase (decrease) 37 dramatically. Effect on present net value is indeterminate, but probably tends to overstate PNV. Two timber flow constraints were used for this alternative. They are less restrictive than nondeclining even flow, but more confining than applying no restriction. First, a harvest floor at 80 percent of the 1975-1980 average annual sale volume11 is assumed for all periods. This floor did not constrain the final solution. Second, harvest volume scheduled in each decade must equal between 75 percent and 125 percent of the previous decade's harvest. This allows sequential increases or decreases in harvest volume, but eliminates drastic fluctuations.12 The effect is to smooth out the harvest somewhat, but also to reduce PNV. The final solution was limited by this constraint in eight of the thirteen periods. To summarize, the IPNF formulation of the efficiency model has several built-in features which differ from Hyde's model. The discount rate is lower and the planning horizon is shorter than infinity. The allowable age of final harvest probably exceeds financial rotation age in some regenerated stands. Timber mining is prohibited, even though some regenerated stands have a negative present net value. Nontimber benefits and costs may have slightly affected the land allocation. The 11Chargeable offered sale volume is the regulated volume offered for sale, but not necessarily sold. Regulated volume excludes such items as salvage sales, which are also excluded from the FORPLAN model. 12An earlier FORPLAN run was made which lacked this restriction. Average annual harvest volume was 97 mmbf in the second decade, 463 mmbf in the third decade and 1853 mmbf in the fourth. While theoretically maximizing PNV, this program does not appear to be implementable. Fluc- tuations from forty percent of current harvest (245 mmbf) to seven times current harvest strain basic linear programming assumptions, because management costs per unit of output would change. Such fluctuations also raise questions about the assumption of a horizontal demand curve. 38 model assumes a horizontal demand curve, and a i25 percent harvest flow constraint was added. The net effect of these features is to produce a lower present net value than an unrestricted efficiency model. If the IPNF model underestimates the true maximum present net value, differ- ences between the true maximum and the other alternative present values will also be understated. CHAPTER V ALTERNATIVES TO THE EFFICIENCY MODEL The Idaho Panhandle National Forest has considered several manage- ment alternatives during the forest planning process. Three of those alternatives will be discussed in this chapter. Comparisons will be made between these alternatives and the efficiency model. They differ in their assumptions and constraints, and in their land allocation results. Alternatives to the Efficiency Model From among the thirteen management alternatives considered by the IPNF, three were chosen for this analysis. The efficiency model out- lined in Chapter 4 will be referred to as Alternative 1. The others are Alternatives 2, 3 and 4. The assumptions and constraints applied to each alternative (USDA, 19823) are summarized in Table 1. Alternative 2 This "high market" alternative emphasizes the production of market goods; i.e., timber and range. Because the IPNF already provides surplus range, this is essentially a timber emphasis alternative. A timber harvest target was set at 400 million board feet per year for the first decade, with nondeclining even flow thereafter. Harvest must be at or following culmination of mean annual increment. An ending inven- tory constraint ensures that the standing volume at the end of the 130 39 4O .GOHuDHom :maao Honawu: Hmafiuoo mnu Boaon moam> um: unwound mouovom x .osam> uoo uoomouo do uoommo oz x x .:0Hu=Hom :xaao Honafiu: Hmafiumo onu scams moam> uoo unwound monouom x x x x x x x x x x x x x x x x .aoauoaom voofimuum locus: aaouoaaaou m soaon maamau woomoouowma ou coacmu woog uowumu coaumasoom xam ucoamwmoma umufinmn sonaumu muafimuumcoo Honafiuaoz vocaauouououo coaumooaam mama um\wnaa cmN us\unaa cos coaoofiuumou umo>ums ommoov umufim uooumoao ouo< oq H420 um umw>umm unamuumaoo muouoo>aa magnum Icmumnom m=Hw> um: anemone mooovom x oumoou moow>ouo mo Nmmh x N x Beam am>o waHaHHoovooz unwouumoou umm>umm muafiouumooo uonafia x x x x meoauma ma you >zm muaaaxmz aOfiuoaom o>Huuofioo mouoz a m N H unamuumooo\o0Hummwmm< o>fiumcuoua¢ m>HHHumGHouH< he umm>umm umnaHH HMSCQ< mwmuo>< .H ousmfim mwuoma ma NH HH OH m m n o m e m m H b p . E . . L _ P . p . P Geomaau SE 22 ..| . I. 52 q O>HumgmuH< I .III m. m>fiumfimuH< I .I In I. ICON N m>fluMCHQUH< H N>HUN~HHNUH< no 0 o a o . \ . .room .1ooq loom w... lllllllllllll -88 roan loom I. l Hmww \mmzz 47 target, Alternatives 2 and 3 produce more timber than Alternative 1 in the first and third periods. That will prove to be important to the local economy, which will be discussed in Chapter 7. Land Allocation Alternative 1 allocates the fewest acres to timber prescriptions, appearing to support Hyde's contention that maximizing present net value would concentrate harvest on fewer acres (Hyde, 1980). Alternative 1 also allocates the least land to intensive management, opting instead for extensive management. Because of the allocation of timber/nontimber compromise prescriptions Alternative 3 has the fewest acres under any form of timber management.15 Factors Affecting Costs Movement away from the efficiency model causes costs to rise for several reasons. Among those discussed here are harvesting on steep slopes, commercial thinning, stocking existing nonstocked stands and accessing remote sites. 15The probable reason for this ambiguous result lies in the shelterwood patterns for various prescriptions. The extensive timber management prescription (T3) can be implemented with either a clearcut or shelterwood silvicultural system. Another prescription, one empha- sizing both timber and visual quality (V3), is very similar to T3. Their shelterwood patterns differ, however. T3 harvests the overstory two decades following the regeneration harvest; V3 delays until the third. This subtle difference gives FORPLAN added scheduling flexibility. With the 125 percent flow constraint in effect on Alternative 1, the V3 prescription can sometimes provide additional volume in a period where there is some slack in the constraint rather than in a period where the constraint is already binding. The effect on present net value is not great-~often just a few dollars per acre. It does, however, confound the interpretation of land allocations. 48 Alternative 1 harvests only 1100 acres of greater than 40 percent slopes in the first decade, about one-tenth of 1 percent of its five decade total. Alternative 2 harvests 15,000 acres in the first period, about 2 percent of its total. Alternative 3 was forced into steeper areas sooner because of the 40 acre clearcut constraint. That restric- tion precludes concentration of a 411 million board foot harvest in the flatter areas. Alternative 4 fared better because of its comparatively low timber target. In the long run, more acres of steep land are harvested under Alternative 1 than any other alternative. Over 40 percent of the impact is delayed until the fifth decade when present value is maximized on those areas.16 None of the alternatives do much commercial thinning in the first five decades. Alternative 1 does almost none--1200 acres in the fourth decade. Alternatives 2 and 3 do the most commercial thinning, on 13,400 and 19,500 acres, respectively. Commercial thinning is under- taken to provide volume needed to maintain nondeclining even flow following the high first decade harvest. The lack of commercial thin- ning is consistent with the results found in a study of Idaho forests by Christopherson and others (1978). Only seven stands of the 117 existing timber stands they examined included commercial thinning as part of the 16There is a definite pattern to the selection of mature stands for harvest under Alternative 1. Period 1 concentrates on stands of high value cedar-hemlock on slopes under 40 percent with low access costs. Period 2 includes more grand fir-alpine fir, higher average access costs and a mix of slopes. Period 3 goes to the lowest valued Species on slopes under 40 percent with moderate access costs. Period 4 goes back to high valued cedar-hemlock, but with higher access costs and steeper terrain. The fifth period picks up the lower valued species with high access costs and steeper slopes. 49 optimal financial management regime. Of those seven, six received additional revenue from an overstory removal, so that only one stand benefited from commercial thinning alone. The fewest acres are stocked under Alternative 1 and the most under Alternative 4. Alternative 1 immediately restocks those acres having a positive present value for timber management. The areas are exclusively on the Kaniksu and Coeur d'Alene National Forests. The other alternatives stock a few thousand more acres in all three periods to help maintain nondeclining even flow in later years. Alternative 4 stocks 63,100 acres in the third decade. Most of those acres are 70-80 year old brushfields on the St. Joe National Forest. Because of high stocking costs, their present value averages -$189 per acre. These backlog acres are still part of the timber base and therefore must be scheduled for restocking in the Current Management alternative. In the first two decades, Alternatives 2 and 3 incur road costs about 9 percent higher than the present value maximizing Alternative 1, although the cost per thousand board feet is similar. Alternative 4 has lower absolute costs but higher costs per thousand board feet. The higher cost per thousand is not offset by higher timber values, thereby reducing present net value of current management. The distribution of road costs over the first five decades is also of interest. Alterna- tives 2 and 3 incur almost half their five period costs in the first two decades. More intensive reading is required to produce higher timber volumes earlier. In conclusion, a number of observations can be made. Alternatives 2 and 3 sacrifice present net value because of a higher than optimal 50 timber harvest target in the first decade. The higher harvest is bought with earlier road construction, more planting, more thinning and earlier entry on slopes greater than 40 percent. Alternative 4 sacrifices present net value for several reasons. Its first period timber target is lower than optimal, but the alternative would produce more if it could do so efficiently. All acres are preallocated to their current management direction, which is less efficient than what could be achieved. This is particularly true of the St. Joe brushfields, which would be better allocated to maintenance or perhaps elk summer range. One other alternative was considered for analysis but was not available. The IPNF considered a working circle constraint which would constrain each designated Forest--Kaniksu, Coeur d'Alene, and St. Joe-- to a 120 percent flow constraint, in addition to nondeclining even flow for the IPNF as a whole. The purpose of the constraint would be to reduce harvest fluctuation from one end of the Forest to another. The constraint was finally dropped from consideration even though the harvest by designated Forest changed by as much as 100 percent from one decade to the next.17 Were the constraint ever applied, it would lower the present value of the alternative. The result would be similar to the existing situation on other National Forests which have overlapping market areas but are administered separately. 17Harvest fluctuations were not as serious when two Forests were combined, e.g. the Kaniksu/Coeur d'Alene and St. Joe/Coeur d'Alene. Since the Coeur d'Alene lies between the other two forests and their log markets overlap, the IPNF planning team chose not to constrain the solution further. CHAPTER VI THE ECONOMIC IMPACT AREA This chapter first presents a profile of the primary impact area for the IPNF. Next, the relationship between the IPNF and the local timber industry is discussed. Timber Dependency in the Impact Area The IPNF economic impact area, shown in Figure 2, includes the five northernmost counties of the Idaho panhandle: Boundary, Bonner, Kootenai, Shoshone and Benewah. These five counties incorporate ninety- three percent of the IPNF land area. Virtually all IPNF full time employees and about half the seasonal employees live within the area. Ninety-three percent of the Forest's stumpage is delivered to mills in the area (Hall, 1980). All five counties are more or less dependent on extractive indus- tries. The 1979 employment figures presented in Table 3 are representa- tive of recent non-recession year employment. The lumber and wood products, government, service and trade sectors are predominant. Kootenai County has the highest population and the highest growth rate. The population in 1980 was 58,759, a 66 percent increase over 1970. Kootenai County also has the most diverse economy. Coeur d'Alene serves as a service center for the area. The lumber and wood products, govern- ment, services and trade sectors each account for over ten percent of total employment. 51 S’Oll'ol oh! 150-. «log 4 4 ;. ‘/ "“7"—"T_°—.—'—' 52 r- , D l p c p . IDAHO PANHANDLE NATIONAL FORESTS uOlu'J g A‘- ECONOMIC IMPACT AREA ‘ .1 E -- e I- ” For." Super-unr- Othe- -_ up... I: on ‘1 V , ' ' K also . '. - , . \q l f w ‘ £ Dunn“ lung-r Slalmn a _ .6 I ' 1’ p '0' (.- mmNo-u. ...... can." Boundary .11 I Hun ‘ ‘C;' I ‘1" a—Fouln Boundary gygf aouuoanv ‘ a“ l ,f.‘ .m... Camry Bow-Guy I $-— __ Key Map ...._._. ‘ c a u A o A l . 4 , 2 Idaho Panhandle N I g . Nallonal Forests I K a l . . c“ 3 l I \ ' . ’o i § 1 ' \ .' I ~ — . _. .1- 2 o O : KOOTENAI ° Ivorian (no I t .3,“ ’colul blunt .m'l.~~ I 'g—n— -——- IILLOGC In! WAILACI l I ' f~’-~."-‘- z nun-'4.__I : Q U I ,3 1 .57.! anoanoue ‘- RIO IV! _—._J———.— —..-.-—. Figure 2. Economic Impact Area, Idaho Panhandle National Forests 53 .uooahoaoam mo uouauumooa .ocmeH mo oumum "mouoom cam.n Hmm.u «on use smm.~ 8mm.m unassum>ou oma.q «Na awn mNH mam mmm.~ anomaaaamomaz a amoa>uam ohm.~ mam mm mm cos omm.H muaumm Hume a ooamuomaH .oucmowm ome.a Nam mmm was omq.a am~.s manna Haauam a oaammaoaz o~o.~ kmm mm“ an Noe MNH.H mmfiufiaau: a cognac“ Iooaaoo .cowumuuommnmua coo.u cod No as use Ema aoauoauumaoo ome.~ oes.~ ma u a u wanna: oma.m~ mwu.o awm.n omq.H NoH.m mme.eu manuauuamaamaaoz Haney oHo.m oas.a mm mu Rafi sm~.H Hague a maauaz suaannm omm.m mam noo.a Ems me~.H «Hm.m muoaaonm woo: a pagan; osm.m eeN.H omo.H «on Noq.i mam.m manuauommaamz Hauoa omH.am mmm.~ kao.~ emm.a mom.e amo.mu mumxnoz suaaam w owmz wmiooz Hauoe oma.os mao.k ma~.m mae.~ cam.w awe.mm Amnaiv aamasoaaam fiance o.~e o.~: o.~m N.Nm a.om m.eo canonafi awaaeu unmonmm amm.o- ao~.m~ ~o~.m we~.k ase.m~ mm~.mm ommfi emm.mw maa.md om~.o emq.m oom.m~ Nmm.mm oama coaumaooom Hmuom. mcoanSm SQSdem hhmvgom Hmddom HMGOuOOM m mqm<fi 0am uooskam mHHHasmm wowwwoq muofi>uom auumuuom muoovoum umouom moooomaaoomfiz muHuomuoz umouom muumua uonfiaa mmmau huumovaH mmmfi .MMHmDQZH mHUDQomm Hmmmom mmH Mom mHZHHHODU ZOHHoo Hmuuvum 0am ouuum .Hmuoq 000.00000 000.00000 000.0000 000.00000 000.00000 moua>uom Honuo 000.0000 000.0000 000.000 000.0000 000.0000 mamuoz vow maouom 00H.~Henqm 000.00000 000.000 000.000000 00¢.fin0000 monumm Hmom mom .ooomuomoH .ooomofim 000.00000 000.0000H 000.0000 000.00000 000.00000 mummy Hamuom moouomaauomwz mma.m~eH~ moo.0aomn ae~.eow~ Aka.mm-~ mmfi.maoom wauxaaua was manumm «<0.H000~ 000.0000 ~00.H00 000.00000 000.0000 moa>uo0 0am Hammad oun< 000.00000 000.0000H 000.000 000.00000 «00.0000 uumua oammuaosz 000.00000 n00.00000 000.0000 000.00000 000.00000 0000000 .aowumofiooaaou .aoaumuuoamomua 000.00000 000.0000 000.000 000.00000 000.00000 00030Hm\uooom> «00.0000 000.0000 000.000 000.00000 «00.00000 muoovoum woos nonuo 000.00000 000.0HON0 000.0000 000.H0000~ 000.000000 mHHfiaanm van 0:00004 000.00000 000.00000 000.0000 000.000000 000.000H00 0ofiuouommsomz moouamaauomfiz 000.00000 000.00000 «00.000H 000.00000 000.00000 ooauoouumooo 050.00000 «00.00000 000.0000 000.00000 000.00000 moaofiz mooucmaaoomfiz 000.0000H 000.0000 000.000 000.00000 000.0H000 mowmuo 00mm van 0000 000.0000 000.0000 000.000 000.00000 000.0005 muoovoum won xuoumo>wg 0n~.00~q 000.0000 000.000 0H0.0000 000.0000 ououanofiu0< moooomaaoomaz AoooHAV Aooofiwq Anamw\maoav Aooofiwv Aooofiwv uoauam uuww< oaoooH uouahoamsm uomuoo vomaoo u=Hm> mmouu anuoa Hmafim Ammkofiv shad .amm< ao00 0000000 0am uumum .00000 0000.0 0000. 0000. 0000. 0.00000 000.00000 0000>000 00200 0000.0 0000. 0000. 0000. 0.0000 000.0000 000002 000 000002 0000.0 0000. 0000. 0000. 0.000000 000.000000 000000 0000 000 moamuamcH .oocmcfim 0000.0 0000. 0000. 0000. 0.00000 000.00000 00000 000000 0000000000002 0000.0 0000. 0000. 0000. 0.00000 000.00000 00000000 000 000000 0000.0 0000. 0000. 0000. 0.00000 000.0000 000>000 000 000000 0000 0000.0 0000. 0000. 0000. 0.00000 000.0000 00000 000000022 0000.0 0000. 0000. 0000. 0.00000 000.00000 0000000 000 cowumofianaaou .doaumuuommomua 0000.0 0000. 0000. 0000. 0.00000 000.00000 0003000000000> 0000.0 0000. 0000. 0000. 0.00000 000.00000 00000000 0002 00200 0000.0 0000. 0000. 0000. 0.000000 000.000000 00000300 000 0000000 0000.0 0000. 0000. 0000. 0.000000 000.000000 0000000000002 0000000000002 0000.0 0000. 0000. 0000. 0.00000 000.00000 000000000000 0000.0 0000. 0000. 0000. 0.00000 000.00000 0000002 0000000000002 0000.0 0000. 0000. 0000. 0.00000 000.00000 000000 0000 000 0000 0000.0 0000. 0000. 0000. 0.00000 000.0000 00000000 000 000000>00 0000.0 0000. 0000. 0000. 0.0000 000.0000 00000000000 0000000000002 0000 0000 000 0000000002 0000000>0 0000000000000 000000000000 0000000 0000000 000000 000000 00000000000 00000000000 00000000000 000 000000 00000 H 0009 0000< oDHm> uaoucH ucmBAOHQBm Hma000u0 00000000 0000000 0020 000020 00202000 0200 .000000 00 00000000002 0 0000 020 002000000000 000020 0 mamoo Hanovmm can mumum .Hmooq mwm.N~ mHo.om New.mH mn~.~ mmm.~ Hmm.H mooflpuom Honuo mmH.H mwo.H qu. Hmm. HmN. wmo. mambo: cam maouom oo~.q mon.c mom.m com. mom. «mo. monumm Hmmm mam moamHSmaH .oocwowm qwm.o omo.m nuc.~ wqm. wmc.H omn. mocha Hanumm mucosmHHoomfiz sso.m smm.~ mm“. Nam. own. ooH. waHxaHuo was waHumm NHw.o emq.oH «Hn.m mmm. ¢H¢.H mom. mow>uom was panama ou=< an.m mom.oH on.m NNq. mun. mmm. momma mammoaonz Hcm.oH moH.mH enm.HH amH.H mm~.H New. moHuHHHuD can aofiumowssaaoo .aoaumuuommnmua wee. omH.H «ma.- moo. one. mum.H voosmam\umoao> mqo. qwo.~ mmo.mm moo. owo. eaH.N muosvoum @003 Honuo mmH. ssa.~ mHm.sm moo. 00H. oms.m mHHHaamm was manon mom.q mNo.m eon.~ mom. 0mm. mcH. wcauauommacmz maoocmaaoomfiz nmn.m mmm.qu n-.N mew. wA mmw. qu. Hom.H oHH. HNH. mmH. muauaaoauw< maoosmaamomwz Homsmmxm monomxm Homsomxm mmcmmxm uouoom z s o HmUHamo umnaHe z a o HmuHmmo Humane as: H as: H ems: H m2: H ”22 H mm:: H Aw oooHV maoocH Amumow aomuomv newshonsm AmmumHV ou Hmumvmm can oumum .Hmooa No.wa~ mm.cm~ H5.mH Adm.mV Ammo.v ma.o- nu.mmn~ moow>umm nonuo m~.mmq Hq.m mm.~ Aqq.v Amoo.v -.w ww.mw¢ mHouoz vow mamuom Nu.omm mm.m 0N.H Amm.v Amoo.v em.m ma.omm ouwumm Hmom was moamuamcH .monmawm N~.om¢~ nw.mm ca.m Aoo.~v Aqu.v ww.~m mm.oo<~ ommua Hamuom maooamaaoomwz mm.qan wo.oH nn.H Am¢.v Aqoo.v oq.m «N.qomfi wsfixafiua mam wafiumm ¢¢.o¢m mw.wm ~w.n Amw.Hv AwHo.v am.qm mo.~ow ooH>uom mam panama ou=¢ w~.m~m oo.~m mo.~ Aqn.v AoHo.v 0H.om wH.Hnn mummy mammoao£3 Ho.meN mn.om ca.“ Amm.Hv AmHo.v mo.~m mm.~mo~ moHufiHauD cam cofiumofiasaaou .cOfiumuuoamawuH «m.o~m mq.m- Ho. Aoo.v Afioo.v qq.mNH mo.~q¢ moosham\uomam> H¢.owo m~.co~ No. AHo.V Afioo.v ¢~.coN o~.¢nq muoavoum woos nonuo mN.omm¢ om.qmm mo. AHo.V Amoo.v ow.¢mm mm.mmnm mHHasBmm can wawmmoq q~.mmm~ om.oH mw.H ANm.v Amoo.v Hm.mH w~.mmm~ wafiuouomwsamz anomamaaoomfiz sm.s~oH NH.oH an.H Ass.v Ameo.v NH.¢ a~.sooH =OHuoauumaoo en.¢omH em.o Hm. Aom.v Aqoo.v mw.m oq.wmmH waaafiz msoocmaaoomaz ~m.mom mH.N 0H. Aqo.v Aooo.v no.~ m~.nom mafimuo boom mam boom ou.ns~ No.H HH. Amo.v Aooo.v em. s~.so~ nauseoum can xuoumm>HH «c.5mm «o.wH mo. AmH.V Amoo.v «H.wH oo.mmm assuaaowuw< maomsmaamomaz Amummw nomuomv omaH «mambo wzz m~.o+ ms: m~.Hu m2: mHo.n ems: sm+ ommH uouumm uamahoaasm Hmuoa mowuaaou ou omammxm omsmmxm nonaHH unmahoaaam Hmuoa madmahmm z w o Haufiamo Hauoa "spas coumwoomm< mwamno udehOHmsm Hmsaq< a m>HHow Hmummmm mam muMum .Hmooa om.wHoom om.moq~ mmn.qu AonH.mmV Aomm.v mm.momfi oo.maowm moofi>uom nonuo mm.mmm~ mH.qq qm¢.n Aqno.mv A¢H0.V Nm.wm mm.HHmm maouoz mam mHmuom mm.mqum q~.m- mom.m~ Ammm.wv Ammo.v oq.mom Ho.mHoH~ oumumm Hmom mam mosNHSmcH .moamcwm NH.mqme ¢¢.¢o~ mmm.mq ANNN.NHV AmoH.v «w.~m~ mn.mmomH mumua Hamuom maoocmaaoomwz om.qm~m~ m~.mm mom.~H AoHo.mv AHmo.v om.wo Ho.onomH wsaxafiuo mam wafiumm mm.¢mmo H¢.mmm m¢@.~¢ AHNm.HHv Aoma.v NH.mm~ no.momo ooa>uom mam Manama oua< HH.HmNHH mN.mHm mem.om AoHH.oHV Ame.v «H.mwo om.-mo~ amass oammoaonz aw.quNm -.quH www.moH Ammo.m~v Aqu.v oq.nooH mo.mmmom mofiuwafiu: mam coaumofiabaaoo .GOfiumuuommsmuH H¢.m¢mHH mm.m~om Non. Awmm.Hv AmHo.v ¢¢.Hmom oc.momw voosham\uooam> ae.H~om No.mm- mam. Awsm.HV AsHo.v H~.mm- mH.mw~o muusuoum woo: umnuo mm.HmaHn am.osmm mew. Hom~.V Asmo.v am.msmm Hw.sHm~o mHHHasmm can wanwOH m~.quwm om.on~ oqw.om Aowm.wv ANHH.V om.qm~ m~.nmmwm waauauommsamz mnooamaaoomwz mo.chqN Nm.mmm mNo.om Ammo.oHv Ammm.fiv qm.mom om.~mq¢~ soauosuumcoo HH.meqm «N.HHH www.mH Amac.mV Aoeo.v cm.NoH sm.mfimem wsaafiz maomamaaoomfiz mm.nmom NM.HN Hem.H Ammq.v Acoo.v HN.oN nm.o~om mafimuu boom mam voom oo.ww- oo.m new. ANmH.V Amoo.v Ho.q oo.mw- muosmoum mam xooumo>HA wn.om mm.ceH mom.m Amm¢.Hv ANHo.v mo.HqH mw.mmo~ musuaaofiuwm msoosmaamomwz Am oooHv ommH mwcmno wzx am.o+ m2: mn.HI m2: mHo.I mmzz ¢m+ ome uouomm oaoosH Hmuoa moauasoo ou omsmaxm oncogxm umbafia maooaH Hauoa mucoakmm z w o Hmufiamo Hmuoa unufi3 woumfioommm owdmnu oaooaH Hmaad< H m>HHwumsuoua< OH «2: H m>wumsumua< 0H mnoh uoaumm m>wumcumua< mommaaou Ammoqv camo woummaoo Ammoqv dfimu maoocH unmahonam m>HH< NH mqmH ”awn—H0 u: mou< uomaaH mzmH .m>wumsumua< zn unmahoaasm Hosaa< owmuo>< .q muawfim m m>HumauouH< N m>HumsumuH< H m>fiumcuoua< oonun. COONH oooqw oooom ooowq ooooo homm\>-«m<:m 81 q m>wumcumua< mou< uommaH mzmH .m>wumapmua< ha mEouaH Hmsca< owmum>< .m madman m o>HumaumuH< N o>HumauouH< H o>fiumaumua< oonmn. omH oom omq coo 0mm OOHH4L:J<:M 2:»4tzhnh4c>z CHAPTER VIII EVALUATING TRADEOFFS BETWEEN EFFICIENCY AND THE LOCAL ECONOMY In Chapter 5 the relative efficiency of each forest management alternative was discussed in terms of its present net value and equiva- lent annual value. Alternative 1 had the highest present net value; it is the most efficient management alternative. Alternatives 2, 3, and 4 produced progressively lower present net values, sacrificing efficiency in order to meet other management objectives. The impact each alternative would have on the local economy was discussed in Chapter 7. Alternative 2 provided the most employment and income in the first decade. It was followed by Alternatives 3, 1, and 4 respectively. At this point the efficiency of each alternative needs to be compared to the effect on the local economy. Measuringgthe Tradeoff In order to relate management efficiency to local economic impacts, each must be expressed in comparable units. The relative efficiency of each alternative has been expressed in terms of its present net value and equivalent annual value. Converting the value of local income to its equivalent annual value provides the comparability desired. The equivalent annual loss in efficiency can then be compared to the equiva- lent annual gain to the local economy. 82 83 Table 13 summarizes the results of comparing the alternatives. Present net values were converted to equivalent annual values for the comparison. The annual figures are for the first fifty years of the planning horizon. Although the absolute values would be larger if we looked at the 130 year planning horizon or an infinite period, the differences between alternatives would remain the same. Focusing on a shorter time period might alter the results, but evaluating long term plans using short term impacts could be misleading. The equivalent annual value of IPNF timber management under the efficiency model (Alternative 1) is $54.14 million. The value of the other alternatives is lower but still significantly positive. The equivalent annual value of income is higher under Alternatives 2 and 3 than under Alternative 1, largely because of the higher timber volume and higher Forest Service expenditures in the first decade. Average annual employment is higher under Alternative 1, but much of the gain is not realized until the fourth or fifth decade. In every case, the gain in local income is less than the loss in forest management present net value, i.e., the local benefit-national cost ratio for each alterna- tive is less than 1.0.22 The comparison of alternatives in Table 13 indicates that the impact on the local economy of deviating from the efficiency model depends on "how much" and "in what direction". Alternative 2 is the best of the group for the local economy. The high timber target in 22 If an alternate approach were used and attention were focused on the first decade alone, the benefit-cost ratio for Alternatives 2 and 3 would be positive. This would constitute a long-term national cost to achieve a short-term local benefit. 84 TABLE 13 COMPARISON OF ALTERNATIVES: EQUIVALENT ANNUAL VALUE FOR FIFTY YEARS Alternative 1 2 3 4 Equivalent Annual Value of: IPNF Timber Management Program (MM$) 54.14 50.64 47.37 40.94 Local Income (MM$) 52.67 54.40 54.34 39.89 Net Change From the Maximum Present Net Value Alternative: IPNF Timber Management Program (MM$) (3.50) (6.77) (13.20) Local Income (MMS) 1.73 1.67 (12.78) Suml (1.77) (5.10) (25.98) Local Benefit-National Cost Ratio .49 .25 -.97 1 Present net value change in the timber program represents a net national loss. Present net value change in local income represents an income transfer, not a net national impact. The two measures are there- fore not normally considered additive, i.e., one cannot add the two together and call the sum "net national change." 85 the first decade and subsequent nondeclining even flow boost local income $1.73 million above what was achieved under the efficiency alternative. This was accomplished at a loss to the national economy of $3.5 million per year. That is the equivalent of about $3000 a year for each of the extra 1166 jobs created in the first decade. By the fourth decade the net annual efficiency loss is the same, but there are fewer jobs created than under Alternative 1. On an average annual basis each dollar of subsidy supports a $0.49 increase in local income. Alternative 3 is also favorable for the local economy, but worse than Alternative 2 from the national perspective. The annual value of local income is $1.67 million greater than under the efficiency alterna- tive. The efficiency loss is $6.77 million per year, or $5,991 per year for each extra job created in the first decade. Each dollar of subsidy supports a $0.25 increase in local income. The nearly double subsidy per unit of impact compared to Alternative 2 is due to maintain- ing the same timber volume in the first decade while staying within the 40 acre clearcut limit. This considerably increased the cost, partic- ularly access cost, per thousand board feet produced. Earlier reliance on harvesting timber on slopes greater than 40 percent also lowered stumpage values and payments to counties in the first decade. Alternative 4 shows the effect on the local economy of producing less than the present value maximizing volume, and producing it in an inefficient way. Current management produces both a net loss in national efficiency and a loss to the local economy. This points out at least three problems with current management of the Idaho Panhandle 86 National Forests. First, the Forests' budget has been inadequate to allow the Forest to operate at its optimal level. Second, current management direction does not make the most efficient use of the avail- able budget. Money allocated to stocking the submarginal St. Joe brushfields, for example, could be used more productively elsewhere if the brushfields were removed from the timber base. The third problem is a remnant of the unit planning process. Former unit plan land allocations were fixed into the current management FORPLAN solution. Since the unit plans were developed in the absence of an integrated, Forest-wide approach and with little regard for economic efficiency, it is not surprising that land allocations are suboptimal. The reSults of this analysis cannot be interpreted to mean that the benefits to the local economy in any way "offset" the efficiency loss incurred by the Forest Service. In Alternative 2, for example, the efficiency loss of $3.5 million per year is a net loss to the national economy. It is a subsidy paid by taxpayers to the benefiting residents of the IPNF impact area. The subsidized value of income in the impact area ($1.73 million per year) is not a net contribution to the national economy. It is simply a substitute for the total gross output and income which might have been produced elsewhere in the economy if timber management dollars were efficiently invested else- where. Also, the local benefits may not materialize if demand for timber products does not increase as indicated. The results of this analysis can be interpreted as follows: 1. If the sole decision criterion for the Forest Service is to 87 maximize national efficiency, the best option is Alternative 1, which maximizes not only the present net value of timber management but also the sum of the present values of timber management and local income. This is the choice dictated by adherence to economic theory. 2. If the sole decision criterion is to maximize the beneficial impact on the local economy, the best option is Alternative 2, which maximizes the present net value of local income. 3. Given the information provided, the tradeoffs between national efficiency and local income are clear. The amount of Hyde's "extended subsidy for which there is no obvious end and for which someone . . . must pay" is clear. The local benefit is also clear, and expressed in comparable terms. If the Forest Service makes a "conscious public policy decision" to subsidize the local economy, adequate information is provided to minimize the resulting inefficiency. If the efficient economic solution is rejected, the best alternative is that which maximizes the positive sum (or minimizes the negative sum) of the national efficiency loss and the local income gain. In this case, Alternative 2 provides the most local gain per dollar of subsidy provided, as expressed in the local benefit-national cost ratio of .49. As pointed out earlier, all benefit-cost ratios are less than 1.0. Summary and Conclusions This research has developed a procedure for comparing losses in national forest management efficiency to the associated gains or losses for a local economy. The procedure can be used to answer the questions "What forest management criterion produces the more positive (or less 88 negative) impact on the local economy?" and "At what cost is the crite- rion followed?" The procedure involves three basic steps: 1. The present net value and equivalent annual value of each forest management alternative, including a maximum present net value alternative, are calculated using the linear programming model FORPLAN. 2. The effect of each alternative on employment and income is determined. An area-specific input-output model can be used to convert changes in timber output, Forest Service expenditures and pay- ments to counties by alternative into changes in the local economic indicators. 3. The present net value and equivalent annual value of local income is calculated. Both costs and impacts are therefore expressed in comparable terms. By following this procedure, direct comparisons can be made between alternatives. The subsidy per job created can be determined. The cost per extra dollar of income supported can also be estimated. The value of additional income in the local economy is not a net contribution to the national economy, but a substitute for activity which might have taken place elsewhere. The results of this research have several implications for national forest land managers. First, some forms of inefficiency are beneficial to a local economy. Policies which keep the harvest above efficient levels and practices which increase Forest Service expend- itures can be locally advantageous. The ratio of local gain to national loss depends on the exact combination of forest management activities and outputs involved. 89 Second, some forms of inefficiency are detrimental to a local economy. Policies which keep the harvest below efficient levels and practices which reduce Forest Service expenditures are locally dis- advantageous. Policies which increase purchaser costs, and therefore decrease stumpage value, also have a negative impact on payments to counties. The negative impacts on payments to counties might be offset in the economy by the increase in purchaser spending. Third, environmental considerations can fall anywhere in the spectrum, having either positive or negative effects on both efficiency and the local economy. For example, the IPNF is considering some alternatives which promote both a higher level of timber harvest and protection of important watersheds. Watershed protection is accomr plished by spreading the harvest to more drainages, reducing the impact on each.individual watershed. The additional access requirements would require a substantial increase in appropriated funds for road construc- tion. The alternative is favorable for the local economy, but the loss in present net value to the national economy is high. Hyde (1981), on the other hand, discusses the case of the San Juan National Forest where the current harvest level is higher than that which would maximize present net value. Efficiency and environ- mental values would both be enhanced by a reduced harvest level, although the local community would be harmed. Once the cost of subsidizing local employment and production through National Forest management is known, it can be objectively evaluated. Where the subsidy per job is small, it might be considered worthwhile. Or a decision might be made that the goal of promoting 90 stable local communities, even if it is within the power of the Forest Service to do so, is not worth perpetual inefficiency in National Forest management. Hyde (1981) has suggested that other alternatives be considered. A compensatory payment to mill owners and employees, or a gradual reduction in harvest levels could be less burdensome for the national economy, while providing an adjustment period for the local community. Waggener (1977) has suggested that if the real policy objective is one of income redistribution, that should be acknowledged. Then the objective should be pursued in an efficient way. Continued subsidies through national forest timber management are a redistribution of income not only from the U.S. taxpayer in general but also from the residents of other areas that might have benefited from the efficient investment of timber management dollars. Waggener goes on to quote the Council of Economic Advisors (1965) "If our economy is to maintain its capacity to grow, government must ease the human adjustments to economic change and assure the redirec- tion of people and capital to new purposes." Such a redirection increases efficiency and eases the transitional burden instead of trying to prevent change in a dynamic economy. Suggestions For Further Application and Research Several possibilities exist for further applications and research on this topic. 1. As mentioned in Chapter 5, one other alternative was orig- inally planned for this research but was not available. That alterna- tive would have included a harvest flow constraint on each of the three 91 designated Forests on the IPNF. It would still be worthwhile to run such an alternative through FORPLAN and perform a comparable analysis. The analysis would be valuable because of the implications it would have for other forests with overlapping market areas. A flow con- straint, particularly nondeclining even flow, on each forest could be very costly and entirely superfluous. 2. There is another approach which might be taken on forests with overlapping market areas. Most national forests use both FORPLAN and a standard input-output approach in forest planning. The basic data for applying the procedure developed here is produced as each forest progresses with the planning process. Comparisons could there- fore be made not only between alternatives on one forest but also between forests. If the decision were made to sustain the subsidized sale volume available to a given community, there would be a basis for offering that volume from the forest with the lowest tradeoff between efficiency and the value of local income sustained. 3. One option for further research would be the estimation of a production equation which would maximize the sum of the present net value of timber management and local income. The FORPLAN objective function could probably be structured to accomplish this. Such a combination might represent the optimal compromise if local community welfare remains an important Forest Service concern. 4. More research is needed to evaluate the effects of fluctuat- ing national forest timber output over time. Specifically, are there additional transactions costs imposed on both the Forest Service and the timber industry which might reduce the apparent gain in present net value from following the existing efficiency model? 92 5. This analysis focused on timber management alone. A more thorough investigation of the effect of environmental factors on the national efficiency/local impact relationship would be a useful exten- sion of this work. LIST OF REFERENCES LIST OF REFERENCES Adams, Darius M. and Richard W. Haynes. 1979. The 1980 timber market assessment model: structure, projections and policy simulations. For. Sci. Monogr. 22. Bentley, William R. 1968. Forest Service timber sales: a preliminary evaluation of policy alternatives. Land Econ. 44:205-218. Berck, Peter. 1979. The economics of timber: a renewable resource in the long run. Bell J. Econ. 10:447-462. Beuter, John H. and Con Schallau. 1978. Forests in transition: relationship to economic and community stability. Paper presented at the Eighth WOrld Forestry Congress, Jakarta, Indonesia. 18 p. Boulding, Kenneth. 1935. The Theory of a Single Investment. Quart. J. Econ. 49:475-494. Bundy, Richard. 1972. Timber resources on state, private and industrial commercial forest lands in north Idaho. Id. Dept. Public Lands, Coeur d'Alene, ID. 20 p. Calish, Steven, Roger D. Fight, and Dennis E. Teeguarden. 1978. How do nontimber values affect Douglas-fir rotations? J. For. 76:217-221. Chase, Teresa A. 1982. Forest plan economic impact analysis. USDA For. Serv. Idaho Panhandle Nat. For., Coeur d'Alene, ID. 36 p. Christopherson, Kjell A., Charles W. McKetta, Charles R. Hatch and E. Lee Medema. 1978. Idaho forest productivity study: Phase II economic analysis. Univ. Id. For. Wildlife and Range Exp. Sta. Bull. No. 26, 84 p. Clawson, Marion. 1976. The Economics of National Forest Management. Resources for the Future, Wash., D.C. 117 p. Craig, George A. and John T. Keane. 1977. Economic analysis: a better way to guide federal timber programs. For. Ind. 104:80-81. Connaughton, Kent. No date. Timber economics in FORPLAN. USDA For. Serv. PNW, Portland, OR. 56 p. 93 94 Council of Economic Advisors. 1965. Annual Report in Economic Report of the President. GPO, Wash., D.C. 290 p. Darr, David R. and Roger D. Fight. 1974. Douglas County, Oregon: potential economic impacts of a changing timber resource base. USDA For. Serv. Res. Pap. PNW-179, 41 p. Dickerman, Alan R. and Stanley Butzer. 1975. The potential of timber management to affect regional growth and stability. J. For. 73:268-269. Faustmann, M. 1849. On the determination of the value which forest land and immature stands possess for forestry. English edition ed. by M. Gane, Oxford Inst. Pap. 42, 1968, entitled Martin Faustmann and the evolution of discounted cash flow. Federal Register. 1977. Timber management planning: sale and disposal of timber. 42:28252-28261. . 1979. National forest system land and resource management planning. 44:53928-53999. Fight, Roger D., K. Norman Johnson, Kent P. Connaughton and Robert W. Sassaman. 1978. Roadless area-~intensive management tradeoffs on western national forests. USDA For. Serv., 57 p. Fisher, Irving. 1930. The Theory of Interest. MacMillan, N.Y. Godfrey, E. Bruce, Ervin G. Schuster and Enoch F. Bell. 1980. Idaho's forest products industry, 1973. USDA For. Serv. Gen. Tech. Rep. INT-80, 42 p. Hall, Ellen J. 1980. Delineation of the economic impact area. USDA For. Serv. Idaho Panhandle Nat. For., Coeur d'Alene, ID. 16 p. . 1982a. Cost, benefits and budget level: Idaho Panhandle National Forest Plan. USDA For. Serv. Idaho Panhandle Nat. For., Coeur d'Alene, ID. 151 p. . 1982b. Economic input to FORPLAN. USDA For. Serv. Idaho Panhandle Nat. For., Coeur d'Alene, ID. 41 p. . 1982c. Base (1980) impact of Idaho Panhandle National Forests on local economy. USDA For. Serv. Idaho Panhandle Nat. For., Coeur d'Alene, ID. 2 p. Haney, Harry L. Jr. and John E. Gunter. No date. Forest finance: a programmed guide for analyzing forestry investments. Va. Poly. Inst. and State Univ., Blacksburg, VA. 107 p. Hotelling, H. 1925. A general mathematical theory of depreciation. J. Amer. Statist. Ass. 20:340-353. 95 Hyde, William F. 1980. Timber Supply, Land Allocation and Economic Efficiency. Resources for the Future, Johns Hopkins Univ. Press, Baltimore. 224 p. . 1981. National forest logs red ink for treasury. Wharton Mag. Fall:66-71. Idaho Dept. of Employment. 1982. Unpublished data. Id. Dept. Emp., Coeur d'Alene, ID. Jackson, David H. 1980a. Sub-regional demand analysis: remarks and an approach for prediction. USDA For. Serv. Northern Reg., Missoula, MT. 12 p. . 1980b. The national forests and stabilization: fact or fiction. Unpublished pap. Univ. Mont., Missoula, MT. 20 p. Jackson, David H. and Alan McQuillan. 1979. A technique for estimating timber value based on tree size, management variables, and market conditions. For. Sci. 25:620-626. Johnson, K. Norman, Daniel B. Jones and Brian M. Kent. 1980. Draft forest planning model (FORPLAN) user's guide and operations manual. USDA For. Serv. 172 p. Josephson, H. R. 1976. Economics and national forest timber harvests. J. For. 74:605-608. Keane, John T. 1972. Even flow-—yes or no. Amer. For. 78(6):32-37. Keegan, Charles. 1982. Unpublished data. Univ. Mont. Bur. Bus. Econ. Res., Missoula, MT. Klemperer, W. David. 1976. Economic analysis applied to forestry: does it short-change future generations? J. For. 74:609-611. Krutilla, J. V. and J. A. Haigh. 1978. An intergrated approach to national forest management. Environ. Law (8). Krutilla, J. V. and J. A. Haigh. 1979. Toward a coherent public lands management philosophy. J. Bus. Admin. (10). Kutay, Kurt. 1977. Oregon economic impact assessment of proposed wilderness legislation in Oregon Omnibus Wilderness Act, No. 95-42, Part 2:29-63. GPO, Wash, D.C. Lofting, Evard. No date. Procedures used to develop state and county data for preparing regional input-output models. USDA For. Serv. Northern Reg., Missoula, MT. 11 p. MacCleery Douglas. 1982. Expectations of the secretary's office related to national forest land management planning. Paper presented at the For. Serv. Regional Foresters and Directors Meeting, wash., D.C. 11 p. 96 Maki, Wilbur R., Con H. Schallau and John H. Beuter. 1968. Importance of timber-based employment to the economic base of the Douglas-fir region of Oregon, Washington and northern California. USDA For. Serv. Res. Note PNW-76, 6 p. McKillop, William. 1974. Economic impacts of an intensified timber management program. USDA For. Serv. Res. Pap. WO-23, 16 p. McKusick, Robert, ed. 1978. Regional development and plan evaluation: the use of input-out analysis. USDA Econ., Statist. and Coop. Serv. Agr. Handbook 530, 128 p. Mead, Walter J. 1966. Competition and Oligopsony in the Douglas- fir Lumber Industry. Univ. Calif. Press, Berkely. 217 p. Merzenich, James. No date. Stumpage price projections. USDA For. Serv. Northern Reg., Missoula, MT. 19 p. Miller, Lester F. Jr. 1980. Grant County, Oregon: Impacts of Changes in Log Flows on a Timber-dependent Community. M.S. Thesis, Oregon St. Univ., Corvallis, OR. 93 p. O'Toole, Randal. 1979. A new reality: timber land suitability in Oregon national forests. Cascade Holistic Economic Consultants For. Res. Pap. No. 4, Eugene, OR. 19 p. P0povich, Luke, 1977. Section 13—-unlucky for even flow? J. For. 75:783-785. Richardson, H. W. 1972. Input-output and Regional Economics. John Wiley and Sons, N.Y. 325 p. Samuelson, Paul A. 1976. Economics of forestry in an evolving society. Econ. Inq. 16:466-491. Schallau, Con H. 1974. Forest Regulation II—-can regulation contribute to economic stability? J. For. 72:214-216. Schuster, Ervin G. 1976. Local economic impact: a decision variable in forest resources management. Mont. For. and Conserv. Exp. Sta., Missoula, MT. 104 p. Schuster, Ervin G., Charles R. Hatch and William D. Koss. 1975. Location quotients, excess employment and short run economic base multi- pliers for Idaho's forest products industry. Univ. Id. For., Wildlife and Range Exp. Sta. Inform. Ser. No. 10, 25 p. Schuster, Ervin G. and William D. Ross. 1979. Origin and destination of Idaho timber harvest 1967 and 1972. USDA For. Serv. R1-79-24, 39 p. 97 Smith, Harry G. 1969. An economic view suggests that the concept of sustained yield should have gone out with the crosscut saw. For. Chron. 45:167-171. Stage, Albert R. 1973. Prognosis model for stand development. USDA For. Serv. Res. Pap. INT-137, 32 p. Stevens, Joe B. 1979. Six views about a wood products labor force, most of which may be wrong. J. For. 77:717-720. Stier, Jeffrey C. 1980. Technological adaptation to resource scarcity in the U.S. lumber industry. Western J. Agr. Econ., 12:165-175. Super, Greg. 1981. Economic impact analysis for forest planning: an input-output model user's guide. USDA For. Serv. Northern Reg., Missoula, MT. 36 p. Terfehr, Thomas R., Richard L. Porterfield and Kenneth Stewart. 1977. An input-output study of the Mississippi economy with emphasis on forestry. Paper presented at Southern For. Econ. Workshop, Gulf Shores, Ala. 16 p. Thompson, Emmett F. 1966. Traditional forest regulation model: an economic critique. J. For. 64:750-752. UDSA Forest Service. 1979. Timber harvest scheduling study: Six Rivers National Forest. Pacific Southwest Reg., San Francisco. 149 p. . 1982a. Alternative analysis package: Idaho Panhandle National Forests forest plan. Idaho Panhandle Nat. For., Coeur d'Alene, ID. 131 p. . 1982b. Unpublished data from Idaho forest survey. Inter- mountain For. and Range Exp. Sta., Ogden, UT. . 1982c. Untitled staff paper. Northern Reg., Missoula, MT. 12 p. . No date. Discount rates to be used for federal long-term investments. Wash., D.C. 12 p. waggener, Thomas R. 1969. Some economic implications of sustained yield as a forest regulation model. Univ. Wash. Coll. For. Resour. Contemp. For. Pap. 6, 22 p. . 1977. Community stability as a forest management objective. J. For. 75:710-714. . 1978. Sustained yield policies and community stability. Paper presented at the Eighth World Forestry Congress, Jakarta, Indonesia. 10 p. 98 Walker, John. 1971. An Economic Model for Optimizing the Rate of Timber Harvesting. Ph. D. Diss., Coll. For. Resour., Univ. wash., Seattle. . 1974. Timber management planning. Western Timber Ass. (8). . 1977. Economic efficiency and the National Forest Management Act of 1976. J. For. 75:715-718. Wilson, Thurmon. 1980. Expenditures used in the 1980 RPA economic impact analysis. USDA For. Serv., Ft. Collins, CO. 8 p. Worthington, R.E. 1975. Some sustained yield issues. Paper presented at Wash. Sect. Soc. Amer. For., Seattle. Youmans, Russell 0., David R. Darr, Roger Fight and Dennis L. Schweitzer. 1973. Douglas County, Oregon: structure of a timber-dependent economy. Oregon St. Univ. Ag. Exp. Sta. Circ. Inform. 645, 25 p. Zivnuska, J. H. 1977. Paper presented to NFMA technical committee, summarized in Popovich, Luke. 1977. Section 13--unlucky for even