ABSTRACT
This chapter presents the continuous-time Ricardian forestry model. It discusses modified golden rules of the system. The chapter focuses on long-run timber supply curve and also presents some comparative static analysis. Ricardo's Principles contain just a single reference to forestry. Then Ricardo seems to contemplate two different possible effects of a higher demand for timber: the extension of forestry to new lands on a permanent basis, which could lead to the rise of the rents paid on these lands and a temporary rise of timber production due to the extraction of timber from standing trees. Since a competitive equilibrium with sustained timber production involves a rotation period that is determined by means of the so-called Faustmann formula, which was probably unknown to Ricardo, our model is a rational reconstruction of Ricardo's scant remarks on forestry, enriched by the tools of modern theoretical literature on optimal forest management.
