GROUP 6

Aninditra Nuraufi
Naufal Adam
Komang Gita
Isti Monica
Pieter Hans

FOREST
BIOECONOMIC MODEL OF
FOREST
 Nonrenewable resources
Calculating the dynamically
efficient rate of depletion of the
resource
Renewable resources
Calculate the size and/or timing
of the efficient harvest
Because renewable resource
stocks are functions of both
natural systems and human
behavior, the models that we
use to analyze them combine
biology and economicsthey are
bioeconomic models
Economics of Forest
Resources
The economic analysis of forest management
raises two issues :
1. Value of a forest is complex.
Value as timber for potential harvest, standing
trees offer other benefits, providing species
habitat and carbon sink.
2. Forested lands exhibit a wide variety of
property rights regimes, ranging from
private ownership to open access.
Start by considering a private landowner
who makes rent-maximizing decisions about
harvesting her trees.
 Forest Growth and
Biological Rotation
Example
The best interval at which to cut and
replant these trees is the age that
maximizes the Mean Annual
Increment (MAI)
Maximize Mean Annual Increment
(MAI) ----> the average volume of the
stand, V (t)/t.
The maximum MAI is often called the
biological rotation
Optimal Aging Problem :
Wicksell Rule
Optimal aging problem : returns
to harvesting stand of trees
once, with no concern for what
will happen to this currently
forested land after we extract
our timber
Net benefit-maximizing year
in which to cut the trees would
occur just as the net returns
to waiting equaled the net
returns to cutting.
Wicksell Rule
 Forest Management Overtime

A basic problem in forest economics is how long to

let a tree grow before cutting it down
The answer is..
Cut the trees down when they are growing at the
rate of interest
The exact point at which our timber investment
should be changed into another investment is when
it has slowed down to a rate of growth exactly equal
to the rate of interest
Rate of growth = Rate of interest

Value of site Concept

The value of a forested piece of land, assuming that the
landowner will implement efficient forest rotation in perpetuity; or
if forestry is not the most profitable use of that land at any
point in the futureconvert the land to its most profitable use
 Faustman rotation:

The Faustmann rule identifies

the dynamically efficient forest
rotation, maximizing the present
value of future net benefits. It
takes into account the time
value of money, and also site
value, the opportunity cost of
keeping the land in forest rather
than converting it to another
use, like farming or residential
development.
Forest Rotation with Non
Timber Forest Benefit
Forests offer many benefits besides
timber such as species habitat,
watershed protection, carbon
sequestration, and recreational
opportunities
Sources of Inefficiencies in
Managing the Forest
 Perverse Incentives for
The Landowner
Private Owned Land
Inability to recognize social cost
might lead to an inefficiency

Government Policy
Improper taxation and land ownership
regulation leads to inefficiency

Concession Agreement
Short term agreement leads to less
incentive to preserve forest
 Perverse Incentives for
The Country
Biodiversity
Destruction of the tropical rain
forests is a major source of
species extinction

Climate Change
Any activities associated with
agricultural sector contributes to
climate change
 FISH

GROUP 6
Aninditra Nuraufi
Naufal Adam
Komang Gita
Isti Monica
Pieter Hans
The Underlying Economic Model
for The Efficient Allocation in
Fisheries
 Biological Dimension

Sa Sb

Sa = natural Equilibrium = Stable Equilibrium

Sb = Min. Viable Population = Unstable Equilibrium
S* = Maximum Sustainable yield Population
Static Efficient Sustainable Yield

Static efficient Sustainable Yield is a catch level that,

if maintained perpetually, would produce the largest
annual benefit
Statif Efficient Sustainable Yield analysis assumes
that:
The price of fish is constant and doesnt depend on
the amount sold
The marginal cost of a unit of fishing effort is constant
The amount of fish caught per unit of effort expended
is proportional to the size of fish population
Static Efficient Sustainable Yield

The efficient level of effort is when the Net benefit is

maximized
Dynamic Efficient Sustainable
Yield

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Market Allocation in Fishery

Competitive Sole Ocean Fisheries

Owner
Well defined property Open access resources
rights 2 kinds of ext costs:
Maximize Profit a) Contemporaneous ext
cost: borne by current
gen, overfish
b) Intergenerational ext
cost: future gen
Public Policy x
Inefficient Allocation
in Fishery
1. Aquamarine

-The controlled
raising and
harvesting fish
-Confined >
Artificial barriers
-Invest >
Productivity
(adding nutrients,
etc)
1. Aquamarine

Fish Ranching Fish Farming

Holding in captivity Cultivating over their
only first few years of lifetime.
their lives.
2. Raising Real Cost of Fishing

-Preventing the use of barricades or

traps
-Rather than allowing fishermen to
spread their effort out over time so the
boats and equip could be more
productively utilized, fishermen were
forcced to buy larger boats to allow
them making as much as possible
during the shorter seasons.
Public Policy

3. Taxes
4. Individual Transferrable Quotas
and Catch Share
5. Subsidies & Buyback
 6. Marine Protected Areas and
Marine Reserves

-MPA: Protected areas of seas, oceans,

estuaries or large lakes. Restrict human
activity for a conservasion purpose
typically to protect natural or cultural
resources.
-MR: Type of marine protected area that
has legal protection against fishing or
development.
7. The 200-mile Limit

Countries bordering the sea have taken

one step by declaring that their
ownership rights extend some 200
miles out to sea.
Within these areas, the countries have
exclusive jurisdiction and can
implement effective management
policies.
Public Policy

8. The Economics of Enforcement

9. Preventing Poaching
By increasing the sanctions levied
against poachers, but it is effective only
if monitoring can detect the illegal
activity and apply the sanctions to
those who engage in it.