ABSTRACT
This chapter explores how economics can be combined with forest ecology to assist in efficiently managing the important resource. It examines the inefficiencies that have resulted or can be expected to result from both public and private management decisions, and considers strategies for restoring efficiency. The chapter explains three types of decisions by landowners–the harvesting decision, the replanting decision, and the conversion decision–that affect the rate of deforestation. Forests represent an example of a storable, renewable source. One strategy specifically designed to protect the indigenous people of the forest as well as to prevent deforestation involves the establishment of extractive reserves. From an economic point of view, the efficient time to harvest a stand of timber is when the present value of net benefits is maximized–that is, when the marginal gain from delaying the harvest one more year is equal to the marginal cost of the delay.
