Socially optimal forestry (Q1110445)

The Faustmann rule is the major contribution of economic theory to the analysis of forestry management. It is typical to consider the Faustmann rule in the context of a model of forestry firm in which there is some periodicity in the rate of harvesting over time. This paper on the other hand shows the Faustmann rule to be associated with socially optimal sustained yield or steady-state regimes. In the course of so doing, attention is placed on the role of the shadow price of a tree in the determination of an optimal harvesting policy.