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Unformatted text preview: 02:20 How much to pay for land just about to be harvested? W+PQ(t) = value of bare land + standing trees W=faustmann asset value of PQert/(1ert) Foresters made mistake in assuming PQ(t)=liquidated value at time t Should discount back GRAPH Timber services (volume): = timber collected at the end of Picture 1 rotation Carbon storage (increases value of land exponentially as t↑): value of carbon storage occurs during entire rotation
Picture 2 GRAPH Not actually happening in the market bc no one pays for carbon storage (public good) Central planning is bad: one rule for heterogeneous product, tries to change private behavior Best way: pay for carbon, markets will adjust (global price) PSet 9 PV of volume= (PQert – C )/(1ert) Max value is optimal harvest age Carbon storage is another service of uncut timber, increasing the optimal harvest time When calculating value of carbon storage or loss from water absorption, remember to take present value 02:20 02:20 ...
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This note was uploaded on 01/26/2010 for the course ECON 330 at Yale.