Reconciling Gray and Hotelling

A bstract .   Early exhaustible resource economics provides an important foundation for recent suggestions that firm-level economic modeling plays a larger role in the analysis of resource scarcity. The lack of empirical support for Hotelling's r -percent rule, introduced in 1931, and recent suggestions that industry behavior may not be reducible to firm behaviors are the primary motivating factors for examining the relative value of Gray's contribution to the field of exhaustible resource economics relative to Hotelling's contribution. Specifically, Gray's papers that appeared in the 1910s provide insight into the heterogeneity of deposits and their spatial dimensions, and offer the possibility that firms will be subject to fixed costs carried over between periods. In this paper, the arguments presented by Gray are formalized in a dynamic model, which allows the differences between Gray's and Hotelling's assumptions to be more fully explored. The results of the paper illustrate that by considering spatially identifiable heterogeneous deposits, fixed costs, and entry costs, in general Hotelling's r -percent rule is not a sufficient condition for firm-level decision making and that firms' extraction behavior cannot be linearly aggregated to describe industry behavior.     

Editorial - An international association of forest economics

While forestry issues and forest economists' interests are increasingly global, the costs of creating an international association have plummeted. These twinned trends suggest that the time is ripe to form an international association of forest economics.Anecdotally, forest economists have expressed considerable interest in international debates and scholarly exchanges. This anecdotal evidence includes expressed interest in a series of informal conversations with forest economists from around the world, the success of international journals such as the Journal of Forest Economics, and the success of international conferences and meetings organized by ad hoc committees. This increasing interest in international activities appears to reflect on-going trends of increased international trade, standardization of forest economic approaches, and increased mobility of forest economists, many of whom are accepting positions outside of their native country or region.Historically, the costs of organizing and sustaining an international association were extremely high. However, the improvement of communication technologies during the past two decades in the form of e-mail, the internet and fax machines have dramatically decreased the costs of many of the basic functions of an international association including interactions between members on scholarly issues, meeting and conference announcements, and members' direct participation in an international organization. These technological advances have been important to the success of the Journal of Forest Economics and to ad hoc organizing committees of international conferences and meetings. Associations can now be primarily virtual in the sense that the only non-electronic aspects of the organization are delivering paper copies of journals, and actual attendance at a conference and meeting.Currently no organization effectively serves as an international organization of forest economics. Existing forest economics associations are regional or national by design. International forestry organizations such as IUFRO, EFI and CIFOR are generally not led by forest economists, are not designed to promote timely scholarly exchanges among forest economists, and usually are unable to change rapidly in response to the changing needs of forest economists.Over the past few years at several meetings a number of forest economists have either discussed organizing an international association of forest economics or expressed strong interest in becoming a member of an international association of forest economics. The Journal of Forest Economics Editorial Board has expressed support of an international association with some members willing to assist the organizing effort. Other forest economists not associated with the Journal of Forest Economics have offered to help organize an association. Some of these forest economists have expressed particular interest in assisting with setting up internal communications for an international association, or organizing a conference under the auspices of an international association.Although previous discussions and preliminary attempts at organizing have not successfully created an international association of forest economics, they have helped uncover strong interest in an international association. There is reason to be more optimistic about the current organizing effort. Probably the most important source of optimism is that it appears likely that IUFRO will now assist efforts to form an international organizational of forest economics by providing both organizing effort and financial resources.A number of significant issues need to be resolved to form a viable international association of forest economics. These issues include:Clarifying the benefits and responsibilities of membership in an international association.Developing a mutually supportive relationship with both regional associations of forest economists, forest economics research centres and international forestry organizations.Determining the range of activities that the international association will routinely address including internal and external communications, the possibility of association sponsored conferences or meetings, organization details and other possible activities.Forming an international association of forest economics is both timely, and will enhance scholarship in forest economics. If you have interest in joining with others to form an international association of forest economics, I urge you to e-mail, brazee@uiuc.edu, the current initial contact point for the organizing effort.     

A Guide to Extracting Information from Environmental Pressure Groups

This paper examines the relationship between environmental pressure groupsand environmental policy makers. Environmental pressure groups are assumedto possess valuable private information on environmental issues.Environmental pressure groups are also assumed to pursue their ownpreferences, which are only partially correlated with policy makers'preferences. A new aspect is that binding contracts with side payments arenot allowed, which accurately describes the interaction betweenenvironmental pressure groups and governments. It is shown that by choosingprobabilities of acting on environmental pressure groups' signals, adecision maker can force environmental pressure groups to reveal superiorinformation even in the absence of binding contracts.     

Taxation, Bequests, and Short and Long Run Timber Supplies: An Overlapping Generations Problem

This paper uses an overlapping generations model with one-sided altruism to study the effects of several forest taxes that target bequests and affect timber supply. Unlike previous work, we investigate bequests and timber supply in both the short and long run when bequests are costly (e.g., taxed). The landowner's problem is examined in the short run, while the government's problem is examined in the long run assuming the existence of a steady state. We also consider taxes targeting harvests, growth, savings and bequests. Several new results are established concerning the interactions of taxes that might be used by a government to alter short and long run forest capital stocks: (i) the presence of a forest bequest tax affects the neutrality of harvest tax in both the short and long run, (ii) in the long run the bequest tax decreases bequests and timber supplies. When the bequest tax is not present, the capital income tax is neutral with respect to bequest and timber supply, while the harvest tax is neutral only if forest productivity is also not taxed. Finally, (iii) in the short run, the substitution and total effects of taxes in landowner decisions generally depend on the presence of the bequest tax. The results have implications for Pigouvian tax design and second best tax choice.