ABSTRACT
Forest-based production inevitably generates linked ‘products’ like lumber and sawdust, oxygen and CO2, or pulp mills and roads. In cases like this, economists speak of joint production.
The joint production problem is related to both externalities (see Chapter 7) and publicness (see Chapter 8), but is perhaps the most fundamental of the three. As with public goods and externalities, efficiency requires a summation of marginal costs and benefits:
Bene f it =∑ i
Bi = benefits from ith product C = cost of the bundle of products
Forest
wood
recreation
squirrels
communities
Figure 4.1: Joint products
The special feature of joint production is that costs usually depend on how much of the basic good is produced, not on the number of byproducts or whether the byproducts are sold or simply ignored. As Kant (2009) observes “forest tenures should be designed to optimize returns from all forest attributes and not only from timber.”
