58 FOREST VALUATION 



lines of business. The calculation itself as a simple problem in arith- 

 metic is no longer discussed. 



Usually the criticism is one of the three following : 



a. Forest valuation, in Germany, does not ordinarily start with 

 bare land but with a forest business fairly regulated for a long time. 

 There is no^tjeed of any compound interest calculation. This argu- 

 ment seems convincing but is not true. In modern forest practice, 

 excepting selection forest, every acre of forest is cut once in each 

 rotation. Whether this is done in clear cutting in a single year or 

 in shelterwood in several years, the land is cleared of the old timber 

 and a new stand is started. To start this stand and care for it dur- 

 ing eighty or a hundred years costs money and when the stand is ripe, 

 the question is : what has it cost to produce ? Since the money spent 

 in planting, protection, administration, taxes, etc., has not paid any 

 interest it is proper that this interest be compounded yearly and 

 charged to the cost of producing the stand exactly as is done in the 

 above calculation for Se. 



b. The second criticism is that the values for final yield and 

 thinnings are useless, since timber prices advance so rapidly that 

 they may double and more during one rotation. This argument is 

 valid but it does not affect the case at all. If a man examines two 

 farms with a view to buying, he is apt to judge on a basis of present 

 prices and if one farm produces thirty bushels of corn per acre and 

 the other fifty bushels he will consider that the latter is worth more 

 than the former. And he will be right regardless of any change in 

 the price of corn. Exactly the same thing is true in forestry. If 

 Faustman applied his calculation to two tracts of forestland sixty 

 years ago and found one of them worth twice as much as the other 

 the important point in his calculation is still valid in spite of the fact 

 that timber has doubled in value during this time. And even the ab- 

 solute value was, for his purpose, entirely right, for no one is willing 

 to buy a farm or forest on the assumption that in one hundred years 

 the crops will be worth double the price. Occasionally there are 

 cases where an advance in price is practically certain and may well 

 be introduced even in calculation of the business. For instance a 

 plantation of pine set out today in the eastern United States may 

 take eighty years to mature and will then certainly not be sold at 

 present stumpage prices. But even in such a case it is not necessary 

 or desirable to assume uncertain advances in prices and most men 

 would prefer to estimate the value of their enterprise on the basis of 

 present prices, using, no doubt, maximum rather than average fig- 

 ures. 



