Scientific forestry, as developed in Europe
during the 19th century and applied and expanded in India by
European foresters like Brandis (1897) under the colonial government, focused
on the maximization of physical mean annual increment, rather than on financial
returns. However, economists have trenchantly criticised this and advocated
alternative financial methods, starting with the discounted cash flow principle advanced by Faustmann (1849), which
has been revisited by Gane (1968). During the later decades of the 20th
century, a number of mainstream economists have advocated economic efficiency principles
for management decisions such as the cutting of old tree stands, choice of
species and product mix, age at harvest, level of investment and costs, and so
on (e.g., Bentley and Teeguarden, 1965; Pearse, 1967; Hyde 1980; Johansson and
Loefgren, 1985; and a host of others).
Over time, the domination of economic
criteria in forestry led to a backlash from ecologists and social
environmentalists, who argued that such a strong orientation to industrial
interests was leading to both ecological destruction and the erosion of
people’s livelihoods and cultural base (see, for example, Gadgil & Guha,
1992). Attempts were made to reconcile financial objectives the interests of
equity by various artifices within he framework of economic theory, such as social
cost benefit analysis, SCBA (Little and Mirrlees, 1974), or including
non-monetised products and services through “unpriced values” (Sinden &
Worrell, 1979). The current fashion is to advocate the other extreme of
completely handing over the forest to local communities (for a recent, comprehensive
statement, see Lele & Menon, 2014).
Rather than be blown around by such changing
currents from the social sciences, the forest establishment may well be
justified in sticking to what it sees as a safe middle path, and to be somewhat
slow in adopting every latest fashion in the social sciences.
Economic critique of traditional forestry
The ‘neo-classical’ economists criticised the
‘sustained yield, no drop-off, and never-declining yield’ principles of the
classical European foresters and their colonial followers on the grounds that they
ignored the costs of time, which imposes costs on financial investment, and of land,
which has alternative uses and hence an opportunity cost that is seldom
considered in public forestry, since the forest department does not have to pay
for the land or its annual rent (Thompson, 1966; Smith, 1969; Waggener, 1969; Ledyard
and Moses, 1974; Roberts, 1974). The economists consequently charged that the
vast resources of publicly owned timber were being inadequately harvested
(Hirshleifer, 1989, p.52). According to Smith (1969), “(a)n economic view
suggests that sustained yield should have gone out with the cross-cut saw” (see
Davis and Johnson, 1987, Chapter 16 for an analysis of harvest decision
criteria).
Prominent economists like Paul Samuelson
and Hirshleifer pressed home such criticisms at a symposium on “The Economics
of Sustained Yield Forestry” at the College of Forest Resources, University of
Washington, Seattle, Washington in November 1974, the proceedings of which were
not published as originally planned because “the implication that more logging
should take place on public lands was unpalatable to many in the industry” (Hirshleifer,
op. cit., p.52-53). However, seeing that the ‘big guns’, like Hirshleifer himself
and Samuelson, in any case managed to get their contributions published in mainstream
journals, one wonders whether the disadvantage was not the other way round!
Hirshleifer suggests that this “shibboleth”
of sustained yield “does seem to be irrationally worshipped in at least part of
the forestry literature”, like the holy cow of India, “with seriously harmful
consequences for the well-being of our nation” as “…a large part of the
nation’s capital is locked up in an untouchable and unremunerative form” despite
a miniscule annual increment (just 0.88% per year) (Hirshleifer, op. cit.).
This amounts to working in the range of “first order absurdity” where annual
yield is falling with further increments in capital stock, or even the region
of “second order absurdity”, where the annual sustainable yield is deemed
negative (and falling). All this calls for a decumulation of excess capital stock, and for the locked up capital
to be realized so that the funds could be invested elsewhere in the economy
(Hirshleifer, op. cit.). To allay fears of future shortages, technological
advance over time “will allow us to get more yield from any given level of
future capital stock” (ibid., p.58), which means that “less current saving and
investment are needed in the case of relatively scarce capital”, and draw-down
of excessive capital types can be faster (p.59). To counter charges of “money-grubbing”, Hirshleifer declaims that
it is verily the moral duty of the foresters, as “stewards” of the public
resource, to work them for maximum return, failing which “we would actually be
better off giving the forests away” (op. cit., p.61).
One such “pathological” effect of sustained
yield (SY) according to Hirshleifer was the so-called “allowable cut effect”
(ACE), according to which adding additional areas of young growth, or even “otherwise
worthless” cut-over lands (ibid., p.63), to an existing estate of mature or old
growth, implies a bigger annual average increment for the entire forest, thereby
justifying a faster rate of liquidation (conversion) of the old growth. Interestingly,
what he finds objectionable in the ACE is, not so much that it appears to be an
unethical way of justifying quicker draw-down of old growth (which economic
efficiency anyway demands even without the ACE being dragged in), but that it
is irrational: “Rationally, of
course, if a cut of over-mature timber is justified, it remains so whether or
not a separate stand of young timber is included in the same working circle” (ibid., p.62). This demolishes one of the fundamental principles of
traditional SY forestry, i.e. that one has to guarantee regeneration before
thinking of cutting, by separating the two decisions. Management decisions are
asked to stand on their own economic feet, rather than being dependent on one
another. In this spirit, Hirshleifer finds objectionable such “slogans” of the
conservative forester as “evenflow”, “sustained yield”, “no-drop-off”, etc.
Such ideals, which stem from the forest service’s misplaced (in the economists’
view) aim for stability, are deserving of censure as “truly pernicious” (ibid.,
p.61), “ridiculous” (ibid., p.64), and so on. There is even a somewhat sly suggestion
that maintaining low current harvest in the public forests might be construed
as a device to prop up private timber returns, even though he finds it
“difficult to believe that the agency might be a tool of large-scale
capitalism” (ibid., p.66).
The great Samuelson’s contribution in the
same conference also got published in the mainstream (Samuelson, 1974). For him,
the debate has to be decided on the basis of “sound economic analysis” (op.
cit., p.466). He does not apparently recognize any intrinsic claim of the redwoods or other old growth to be preserved
in lieu of some other crop that may well provide better external or other
benefits. Long-rotation, sustained physical yield forestry (“jam tomorrow and
never jam today”) could be conceivably justified only if some extra-ordinary positive
externalities could be proved, in which case he believes that “all economists
would be found on the side of the angels, sitting thigh next to thigh with the
foresters” (ibid.). Like Hirshleifer, Samuelson also declares that the market
forces will apply the desired corrective if the rate of exploitation is felt to
be too high or when scarcity of wood looms (op. cit., p.485). Keeping old
forest stands intact is, in his analysis, contingent on society making an informed choice to sacrifice current
returns for this purpose, which it will when a certain level of prosperity has
been attained (op. cit., p.486):
"The proper way of looking at
publicly-owned land is to view it as any public asset. It’s something which is
convertible into something else. Too often we’re canny as all hell in running
private business and we’re reckless as all hell in running public business.
Well, you can be reckless by having things grow too long as well as by not
having them grow long enough. We would be better off today if we had adopted a
more rational timber harvesting policy in the past." (Samuelson, in discussion
reproduced in Dowdle, 1974).
Impact of economic theory on forestry strategy in India
Faced with such a formidable campaign, the
traditional forester, unschooled in the art of academic polemics, was unable to
put up even a weak fight, if any. From the traditional forester’s viewpoint,
the ACE is a corollary of that fundamental bugbear of forestry, namely that the
product (annual increment of timber) is physically indistinguishable from the
factory (the standing, growing tree). The forest management systems generally
require that regeneration be established on an equivalent area before taking
the harvest (see Shyam Sunder and Parameswarappa, 2014, for a recent
description of these practices in Indian forestry). There is a danger that if
even newly regenerated or even vacant lands are
added to the pool to calculate annual increment on an area basis, this may
result in the more objectionable excesses of theACE, and would generally not be acceptable to the sustained yield forester, for whom the harvest decision is contingent on the state of the forest as a whole and whether or not a full or 'normal' series of young crops is being built up commensurately. If regeneration is not
successfully established, fellings in the mature or old-growth
crops would need to be delayed or postponed, which would again attract criticism from the economic efficiency viewpoint. Forestry,
which was accused as acting as a ‘dog-in-the-manger’ by occupying large stretches of land,
water and mineral resources
while yielding very low direct financial returns, was less and less able to
attract any support, either from policy planners or from the mainstream
academics, who mostly followed the eminent economists in castigating sustained
yield as too conservative and unreasonably demanding.
One of the ‘pernicious’ effects (to borrow
the economist’s favourite term of endearment) of putting economics on top, was
that aspiring foresters could not advance their professional careers except by
endorsing those principles. For the persons entering the Indian Forest Service
in the 1970s, forest economics happened to be the main avenue for higher
specialization, as most of them were not from the biology stream (a good
example is afforded by Nautiyal, an Indian forester who made good
in the University
of Toronto
One of the direct consequences was the devaluing
of natural forests, expressed unambiguously in the Report of the National
Commission on Agriculture (NCA, 1976) which called for a major change "from the present conservation oriented forestry to a more dynamic programme of production forestry", heavily slanted toward conversion of the low-productivity mixed
forests into monoculture of fast-growing species (like eucalypts) in a bid to raise the low average annual productivity of the forest estate in terms of industrial wood (e.g. pulpwood). Ironically, many Indian foresters, although by training votaries
of sustained yield, were also
in the vanguard of this transformation. Indeed, it would not be far off the
mark to say that the forestry chapters in the NCA report were drafted by
foresters who had become forest economists.
As already mentioned, this inordinate
endorsement of commercial forestry led to a backlash from ecologists and social
environmentalists, who mounted a successful campaign to bring back the values
of ecological sustainability and social (equity) concerns. The story of the
campaigns, against this type of intensive and invasive forestry involving large
scale conversion of mixed native forests to monoculture and the heavy
dependence on a few exotic species like eucalyptus, has
been has been told and retold in
the literature, and will not be repeated here. Suffice it to say that India as a polity has resoundingly rejected the neo-classical economic efficiency model
in forestry, until today there are no ‘green’ fellings in most state forests
(apart from clearance for development projects), no clear-felling
of natural forest, exotics like eucalypts are discouraged or banned in
reforestation, and the revised forest policy of 1988 clearly puts environmental
and ecological interests above industrial products, and the livelihoods of
local communities above commercial returns.
As for the forest departments, they were made to appear as the villains twice over: they were fated to lose in the economists’ view if they stuck to their conservative, low-input low-output ways of sustained yield, and they were fated not to win if they took to fast-growing, intensive forestry based mostly on exotic species.
As for the forest departments, they were made to appear as the villains twice over: they were fated to lose in the economists’ view if they stuck to their conservative, low-input low-output ways of sustained yield, and they were fated not to win if they took to fast-growing, intensive forestry based mostly on exotic species.
References
Bentley, W.B. and E. Teeguarden. 1965. Financial maturity: a theoretical review. Forest Science, 11: pp.76-87.
Brandis, Dietrich. 1897. Forestry in India. Origins and Early Developments. Reprinted 1994 by Natraj Publishers, Dehradun.
Ciriacy-Wantrup, Siegfried von. 1952. Resource Conservation: Economics and Policies. University of California Press, Berkeley.
Davis, Lawrence S. and K. Norman Johnson. 1987. Forest Management. Third Edition. Chapter 16 (pp.685-712): Analysis of Harvest Schedules. McGraw-Hill Book company, New York.
Dilip Kumar, P.J. 1988. Cost Benefit Analysis and Sustained Yield Forestry in India. Thesis submitted for the PhD degree, Department of Forestry & Wood Science, University College of North Wales, Bangor, Wales.
Dilip Kumar, P. J. 1996. Optimal silvicultural regimes and rotations for teak plantations. In J.Kerr et al. (eds.), 1996, “Natural Resource Economics. Theory and Application in India”. Oxford & IBH Pub. Co. Pvt. Ltd., New Delhi.
Dowdle, B. (Ed.). 1974. The Economics of Sustained Yield Forestry. A Symposium. College of Forest Resources, University of Washington, Seattle. (proof copy, mimeo.).
Faustmann, M. 1849. Calculation of the value which forest land and immature stands possess for forestry. Transl. W.Linnard, in M.Gane (ed.), 1968.
Fellner, W. 1967. Operational utility: the theoretical background and a measurement. In Ten Economic Studies in the Tradition of Irving Fisher, p.39-74. John Wiley & Sons, Inc. New York.
FRI, Dehradun. 1959. Yield and Stand Tables for Plantation Teak (Tectona grandis Linn. F.). Indian Forest Records (New Series), Silviculture, Vol.9, No.4. Silviculture Branch, Forest Research Institute, Dehradun, India. Manager of Publications, Delhi.
Gadgil, M. and Ramachandra Guha. 1992. This Fissured land. An Ecological History of India. Oxford University Press, New Delhi.
Gane, M. (Ed.). 1968. Martin Faustmann and the Evolution of Discounted Cash Flow. Institute Paper 42, Commonwealth Forestry Institute, Oxford.
Hirshleifer, Jack. 1989. “Sustained Yield” versus Capital Theory. Chapter 3 in volume Time, Uncertainty, and Information. Basil Blackwell Ltd. Oxford, UK. (Paper originally presented at a symposium on “The Economics of Sustained Yield Forestry”, held at the College of Forest Resources, University of Washington, Seattle, Washington in November 1974, mimeo, see Dowdle, ed., 1974).
Hyde, W.F.1980. Timber Supply, Land Allocation and Economic Efficiency. Resources For the Future (RFF), Inc. Johns Hopkins University Press, Baltimore and London.
Johansson, P.-O. and Loefgren, K.-G. 1985. The Economics of Natural Resources. Basil Blackwell, Oxford.
Kula, E. 1984. Derivation of social time preference rate for the United States and Canada. QJE (November): pp. 873-882.
Ledyard, John and Leon N. Moses. Dynamics and land use: the case of forestry. In Dowdle, 1974. (q.v.)
Lele, Sharachchandra & Ajit Menon. 2014. Democratizing Forest Governance in India. Oxford University Press, New Delhi.
Little, I.M.D. and J.A. Mirrlees. 1974. Project Appraisal and Planning for Developing Countries. Heinemann Educational Books Ltd. London.
Marwah, Anuradha and Varun Thakkar. 2014. On their shoulders. In praise of forest guards, the foundation for wildlife protection in India. Sanctuary Asia, Vol.XXXIV, No.5 (October 2014).
NCA. 1976. Report of the National Commission on Agriculture (NCA), Part IX. Forestry. Ministry of Agriculture and Irrigation, Government of India. New Delhi.
Nautiyal, J.C. 1988. Forest Economics. Principles & Applications. First published 1988 by Canadian Scholars’ Press Inc., Toronto. Reprinted by Natraj Publishers, Dehradun.
Pearse, P.H. 1967. The optimum forest rotation. Forestry Chronicle, 43 (2): pp.178-195.
Price, Colin. 1989. The Theory and Applications of Forest Economics. Basil Blackwell. Oxford.
Raj, K.N. 1966. Price behaviour in India. 1949-66: an explanatory hypothesis. IER 1(2). Reproduced in P.Chaudhuri (Ed.), 1972: Readings in Indian Agricultural Development, pp.155-176. George Allen & Unwin Ltd. London.
Roberts, M.J. 1974. Sustained yield and economic growth. In B.Dowdle (Ed.), q.v.
Samuelson, P.A. 1974. Economics of forestry in an evolving society.
Journal of Public Enquiry, 14(4): pp.466-492.
Shyam Sunder, S. and S.Parameswarappa. 2014. Forest Conservation Concerns in India. Bishen Singh Mahendra Pal Singh, Publishers, Dehraun.
Sinden, J.A. and A.C.Worrell. 1979. Unpriced Values. Decisions Without Market Prices. John Wiley & Sons, Inc. New York.
Smith, J.H.G. 1969. An economic view suggests that sustained yield should have gone out with the cross-cut saw. Forestry Chronicle 54(3): pp.167-171.
Subramanian, D.K. 1984. Energy utilization in Karnataka. In C.J. Saldanha (Ed.), 1984: Karnataka State of Environment Report 1983-84. Centre for Taxonomic Studdies, IISc, Bangalore.
Squire, L. and H.G. van der Tak. 1975. Economic Analysis of Projects. Wprld Bank Research Publication. IBRD. Johns Hopkins University Press. Baltimore and London.
Thompson, E.F. 1966. Traditional forest regulation: an economic critique. J. Forestry, 64: pp.750-752.
Waggener, T.R. 1969. Some Economic Implications of Sustained Yield as a Forest Regulation Model. Contemporary Forestry Paper Contribution No.6. Institute of Forest Products. College of Forest Resources, University of Washington, Seattle.
Wesley, D.G. 1964. The Revised Working Plan for the High Forest Blocks of Yellapur Division. Forest Department. Government Press, Bangalore.
No comments:
Post a Comment