Forest Economics Module 1

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social science `which deals with the allocation of scarce resources among competing and insatiable human wants.

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Economics

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It is the study of scarcity and its implications for the use of resources, production of goods and services, growth of production and welfare over time, and a great variety of other complex issues of vital concern to society.

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Economics

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It studies how individuals, businesses, governments, and nations make choices on allocating resources to satisfy their wants and needs, trying to determine how these groups should organize and coordinate efforts to achieve maximum output

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Economics

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Foundations of economics

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1. Human wants

2. Resources

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the mainspring of economic activities

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1. Human wants

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Characteristics of human wants

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cannot be satisfied as a whole varied recurring

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Classification of resources based on renewability

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Renewable resources

Nonrenewable resources

Technology/Techniques of production

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resources which can replace or increase themselves with proper management regime

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Renewable resources

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different units of the resource become available at different time intervals

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Renewable Resources

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maybe abused to the point of exhaustion are usually interrelated

most biological resources are renewable

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Renewable Resources

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do not have the capacity to replace themselvestotal physical quantities do not increase significantly with time; or do so at very slow rates to be economically relevantbecome interrelated because of man’s activities

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b. Nonrenewable resources

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Characteristics of resources

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Scarce

Versatile

Can be combined in varying proportions to produce a product

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refers to the state of the art available for combining and transforming resources into goods and services.

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Technology/Techniques of production

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Functions of an economic system

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1. To determine what goods and services to produce

2. To determine how goods and services are to be produced

3. To determine how to distribute goods and services

4. Rationing of goods in the short run

5. Economic maintenance and growth

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Organization of an economic system

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Economic system

Pure ‘private enterprise system”

Pure “socialistic system” –

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an economic system characterized by private ownership of resources as well as goods and services. Private individuals, business enterprises and associations of various kinds can engage in whatever voluntary production and exchange activities they desire (highly decentralized).

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Pure ‘private enterprise system”

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a economic system in which the government owns and/or controls resources and good and services. Production takes place in government enterprises and the government specifies the conditions under which exchanges can occur (highly centralized).

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Pure “socialistic system” –

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the institutional framework within which a society carries out its economic activities.

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Economic system –

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Units of an economy:

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Individuals

Firms

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is concerned with human behavior in the activities of production, consumption (or utilization), and exchange of goods and services.

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Economics

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is an applied field of economics which deals more with problems in application than with theory.

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Forest economics

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This means concern with much of what we do in our daily lives. The wants of man are infinite and resources available to satisfy these wants are limited.

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economics

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This situation gives rise to the fundamental economic problem of how to satisfy unlimited wants from limited means. The problem is also known as ____.

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economics---allocation

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Two areas of study in Forest Economics

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Forest Industry Economics

Forest Management Economics

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which deals with all economic problems concerning the growing of forests and producing all products like timber, wildlife, water, outdoor recreation and forage from forest land

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Forest Management Economics

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which deals with the study of manufacturing logs from standing forests, their conversion into lumber, pulp, paper, plywood, and board products and , their trade.

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Forest Industry Economics

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Importance of Economics to Forest Resources Management

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1. The importance of economics in forestry is the fact that forest resources are scarce resources

2. Prioritization requires that decisions have to be made as to how and why forest resources are allocated and used

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Economic problems in forestry

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In forest utilization

In forest production

In forest conservation

Need for information about supply, demand, prices of products, costs of production

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In forest utilization

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1. Allocation of materials among processing plants

2. Product mix

3. Degree of processing integration

4. Some technological, personnel and marketing problems

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Problems in forest production

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1. Production of forest outputs like timber/stumpage, non-timber plant crops, range, water, recreation, wilderness, aesthetics, etc.

2. Determination of the optimal mix of forest crops, services and amenities to be produced from a given management unit

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In forest conservation

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1.Concerned with the wise use of the forest to attain optimal balance between forest and non-forest systems through time

2. Main problem is how best to prevent or minimize the deterioration of the ecosystem

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___ together with quantities of resources in existence sets limits on the level of satisfaction than an economy can achieve. The choice of technology depends on which products or services require the least resources.

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Technology

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Economics touches all facets of forestry ko

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1. There are economic problems in owning, buying, selling and managing forest goods as well as in determining the use of such goods for timber, recreation, water, forage, etc.

2. Even the biological aspect of forestry is tied to economics. Why do we want to enhance the growth of trees? Or to minimize or avoid pests and diseases?

3. Resource recreation implies wise use, and this is important because of intergenerational issues regarding the use of forest resources

4. There are also economic problems in resource utilization and output distribution

5. Economics also guides planners/decision makers in setting objectives. Any management activity will be pursued to answer human needs. In formulating and evaluating strategies, financial and economic feasibilities are always considered together with technical feasibility

6. The allocation of lands to different uses is usually hinged on economic considerations.

7. Finally, when we strive for efficiency in FRM, we are basically considering the elements of production, guided by the principles of profit maximization and cost minimization.

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Renewable resources

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Resources which can replace or increase themselves with proper management regime

Different units of the resource become available at different time intervals

Maybe abused to the point of exhaustion

Are usually interrelated

Most biological resources are renewable

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Nonrenewable resources

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Do not have the capacity to replace themselves

Total physical quantities do not increase significantly with time; or do so at very slow rates to be economically relevant

Become interrelated because of man’s activities

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Example of highly decentralized country

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Philippines

Japan

Hongkong

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Example of highly centralized country

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North korea

Cuba

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Types of wealth

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Capital wealth

Natural wealth

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Produce by human needs to produce goods

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Capital Wealth

ex. Human intelligence

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Stock resources

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Natural wealth

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Natural wealth example

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Soil & minerals

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11 basic needs of man

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Food & water

Air

Shelter

Education

Clothing

Financial

Recreation

Religion

Medicine

Transportation

Governance

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Man needs & wants

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Basic needs

Needs beyond basic

Luxury goods

Created goods

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Classification of resources

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Land

Labor

Capital

Entrepreneurship