444 ANNUAL REPORT SMITHSONIAN INSTITUTION, 1910. 



incident to the sale itself as a business transaction. When a pur- 

 chaser cuts timber under an agreement to pay the owner a certain 

 amount per 1,000 feet the owner must measure the amount cut. The 

 cost of doing this should be counted as a current expenditure. On 

 the other hand, that part of the cost of timber sales which goes back 

 into the forest, so to speak, should be reckoned differently. It is a 

 betterment expenditure. 



Of course, such a point of view as this is not easily reconcilable 

 with the methods customary in handling Government expenditures. 

 The national finances do not ordinarily make a distinction between 

 money expended as capital investment and money disbursed for cur- 

 rent expenditures. Both are paid alike from current receipts. I 

 merely wish to point out that in order to judge properly as to the 

 true character of the work of managing the national forests it is 

 necessary to look at them from the standpoint of the business man 

 and to distinguish between actual running expenses and investments 

 on capital account. 



A more obvious investment on capital account, which forms a 

 considerable part of the annual expenditures of the Forest Service, 

 is found in the expenditures for so-called " permanent improve- 

 ments." Both the protection and the use of the forests depend on 

 their equipment with roads, trails, telephone lines, fire lines, watch 

 towers, rangers' cabins, fences and water tanks in connection with 

 handling stock, and various other works of construction. Plainly, 

 expenditures made for these purposes should not be combined with 

 expenditures necessary for the transaction of current business and 

 a balance struck against receipts if the result is to be used as the 

 basis for a judgment as to whether or not the forests are paying. 



Another very large item in the total cost which national forest 

 administration entails is the cost of protecting the forests from fire 

 through the maintenance of a protective force. The national for- 

 ests contain over 500 billion board feet of timber. Only a very small 

 part of this is now within reach of a demand which will enable the 

 Government to sell the timber, except at a great sacrifice in price, 

 if at all. A private owner who was protecting timber which was 

 not ready to cut would treat the cost, from an accounting standpoint, 

 precisely as he would the cost of paying taxes on the timber. In 

 other words, it would amount to an annual increase in his invest- 

 ment. The question whether the expenditure was wise would not 

 in the least depend on whether he was getting back anything from 

 the forest or not. If his final profit is enough greater than what he 

 could realize now to more than cover the cost of holding the timber, 

 he has done well to hold it. 



While it would be well worth while, from the standpoint of money 

 receipts, for the Government to protect the great amounts of timber 



