ISSN: 1659-2751

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Distortions in the Classical Forestry Economy Theory Related to the Calculation of the Land Asset Value and the Selection of Optimal Rotation Age

Abstract

This article deals with the theoretical problems affecting the calculation of the land asset value and the inter-temporal decision in relation to the optimal rotation age in forestry considering the application of the microeconomic model of the König-Faustmann or land expectation value (LEV) formula. The aim of this research is to propose a unified conceptual framework for these three LEV formulas identified with the intention to improve the theoretical and practical application of these formulas in solving economic problems of forest management. A set of conditions present in the forestry economics classical theory has created the co-existence of different LEV formulas, which has resulted in the calculation of different land values for the same forestry case. Probably, the root of the problem is located in changes in economic and forestry traditions and paradigms of even-aged clear-cut forest management during the 195 years of LEV applications. The discussion is focused on the possible implications of the economic analysis using the LEV formulas in relation to the calculation of the optimal rotation age. It is suggested to make explicit a fifth assumption with the intention to avoid any ambiguity in the solution of the economic analysis in forestry.

Key words: Faustmann formula, forestry economics, optimal rotation age, forest valuation, land expectation value.

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