Economic strategies for forest regeneration

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Virginia Polytechnic Institute and State University

This study derives a theoretical basis for planning forest regeneration operations and forest regeneration research projects. The purpose of such planning, is to facilitate effective implementation and monitoring of projects so that the forest investment goals of the finn may most easily be met.

After discussing three approaches to problem solving, a production economic theory model is developed to derive the optimum production relationships. Regeneration strategies are defined as plans aimed at achieving these optimum results. A concept of regeneration research strategies is limited by the perfect certainty assumption of the model.

Due to the uncertain nature of future events and the long period of forest production, the perfect certainty restriction is abandoned. Several methods for dealing with risk are discussed, including expected value, risk-adjusted discount rates, certainty equivalents, and risk measurement. A Markowitz efficient risk-return investment frontier is illustrated. Optimal investment strategies are those which maximize the firms risk-return utility preference subject to the efficient investments frontier.

The scope of regeneration and regeneration research strategies is expanded and illustrated through use of the risk-return model. Regeneration strategies are plans aimed at making the highest return from forest production subject to the firms risk-return preferences. Regeneration research strategies are employed to select the optimum methods of research and optimum project selection. Regeneration research should be aimed at increasing the forest production function, learning more about the production relationships, and reducing the risks of production.