70 



March 199X. A paper presented to the 53rd annual 

 Redwood Region Logging Conference, Ukiah, California. 



THE DESTINY OF THE CALIFORNIA TIMBER INDUSTRY IN THE NINETIES 



By John //. Grobey, Ph.D. I 

 Humbol(^t Stale University 



I recently completed a study entitled. The Forcat Producta Industry arid 

 TT^ff CnHfomlfl Ecpnornv - This paper Is oxtrsclcd in part from a brief epilogue 

 to that study, but hero I carry the issue oddrcsscd there considerably further. 

 The purpose of the study was to develop estimates of the economic impacts of 

 imposing odditionnl regulatory rcsirictions on forest land management that 

 would result in reduced levels of timber harvest in California. This effort 

 involved thedevolopment of improvements to an existinginputroutput model 

 with respect to intcr-industry linkages, and its adaptation to focus specifi- 

 cally on California's forest products economy. 



SufHco it to soy that tho current and impending odditions to timber 

 harvest rostrictiona will have disastrous economic impacts on regions of tho 

 BtDlo that aro honvily orltyitcd toward tho forest products industry. But 

 Instond of focusing on thcso impoct ostimatos It is tho purposo of this pnpor 

 to deal with related matters of political economy which I believe are at least 

 as significant, if not moro so. 



Tho economic impact estimates developed in tho study represent costs: 

 Reductions in employment, income, weal th and tax revenues Hnancing public 

 sector activities that would follow from new restrictions. The bcnents would 

 be environmental enhancement, sometimes loosely defined, from which 

 value accruing to the public would flow directly rather than through markets, 

 as in the caso of the costs. Developing estimates of the magnitudes of these 

 benefits was beyond the scope of ray study. However, aomo brief remarks 

 about this omission may bo helpful to those who have occasion to uso tho 

 economic impact estimates. 



Environmental benefits are largely personal and psychological in nature 

 and they vary widely among people of difTercnt income levels. Estimates of 

 their magnitudes ore, therefore, at least partially arbitrary and partially 

 reflective of tho personal preferences of those who prepare them, rather than 

 being based on observable and objective measures. In many cases environ- 

 mental policy decisions are, by law, foreclosed from even considcringeconomic 

 consequences. Thus enormous costs may result from decisions taken for tho 

 sake of dubious environmental values. 



Policy-makers generally recognize that disparities exist between the 

 occuracy of estimates of economic costs on the ono hand, and tho moro- 

 difficult-to-measure benefits of environmental regulations on tlio other. 

 Moreover, environmental issues aro by no means uniqu' In this regard. A 

 responsibility of policy-makers is to mako decisions even though faced with 

 such circumstances. It can only bo hoped that some weighing of l>cnen ts and 

 costs will bo undertaken in reaching policy docislons. 



An additional point needs to bo raised about any benefit-cost framework 

 used in appraising the desirability of environmental policies. Trade-offs 

 bctwoen economic costs and anticipated environmental benefits that are 

 apparent when a new regulation is adopted may be quiet different from those 

 that actually develop in the longer run. In other words, unanticipated 

 economic and perhaps environmental effects may well occur. 



At least since Adam Smith published his classical work on tho wealth of 

 nations, the central focus of economic analysis has been on a comparison of 

 tho social pcrformanco of various policies and their interaction with tho 

 Institutional arrangements within which economic activity takes place. Tho 

 explicit or implicit changes In the institutional arrangements under which 

 forestry is practiced is an important trade-offin addition to that between the 

 measuroblo economic impacts and the much-morc-dimcult-to-mcosure envi- 

 ronmental iMncfita involved in moro restrictive forest policy. 



