Journal of Forest Economics > Vol 12 > Issue 2

An early contribution of Martin Faustmann to natural resource economics

Esa-Jussi Viitala, , esa-jussi.viitala@metla.fi
 
Suggested Citation
Esa-Jussi Viitala (2006), "An early contribution of Martin Faustmann to natural resource economics", Journal of Forest Economics: Vol. 12: No. 2, pp 131-144. http://dx.doi.org/10.1016/j.jfe.2006.04.001

Published: 28 Jun 2006
© 0 2006 Esa-Jussi Viitala
 
Subjects
 
Keywords
JEL Codes:Q23N50G31
Efficient land useFaustmann formulaForest valuationOptimal forest rotation
 

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In this article:
Introduction
Faustmann formula before Faustmann
Faustmann's early contribution
Discussion

Abstract

Martin Faustmann has been credited with discovery of the ‘Faustmann formula’, but in this paper we show that similar principles of capital valuation were expounded somewhat earlier. A recently discovered article, published in August 1849 under nom de plume F., is a landmark in the capital valuation of forests and other renewable natural resources, as it appears to contain the first comprehensive and explicit description of the valuation principles in accord with modern capital and investment theory. In contrast to Faustmann's subsequent classical paper, this article also shows how the optimal cutting age of standing timber can be determined analytically and demonstrates how the valuation method adopted can be used to solve several other key questions concerning efficient forest management and land use.

DOI:10.1016/j.jfe.2006.04.001