FOREST POLICY. 19 



It is evident that the rate of interest in conservative forestry 

 assuming stumpage values to remain constant is low, and 

 much lower than the rate of revenue obtainable from other in- 

 vestments now-a-days in the United States. 



The chances for a remunerative outcome in conservative for- 

 estry are increased wonderfully where there exists the possibility 

 of finding, in the near future, a market for small timber and wood 

 obtained by way of thinnings. 



By means of thinnings may be obtained, from time to time, a 

 surplus revenue, off-setting the interest charges and expenses 

 which have accrued against the investment from the time of the 

 last cut. 



The rate of revenue in conservative forestry must remain small, 

 in the long run, for this general reason : Whenever an investment 

 that cannot be duplicated readily yields an increasing revenue, 

 the value of the investment itself is advanced immediately at a 

 rate proportioned to that at which the revenue has increased. To 

 illustrate: A given forest, conservatively treated, was yielding, in 

 1890, a net revenue of one dollar per acre per year. The forest 

 was sold at that time at 50 dollars per acre. In 1910, the same 

 forest was yielding an annual net revenue of 2 dollars per acre. 

 Its value is now estimated to be 100 dollars per acre. Obviously 

 the surplus dividend obtained by the owner has not been as low 

 as 2 per cent. The cash dividend was 2 per cent indeed ; there 

 has been added to the principal, however, a latent dividend, 

 developing the original investment of 50 dollars per acre, in the 

 course of twenty years, into a present investment of 100 dollars 

 per acre. 



The nominal rate of interest derivable from any investment 

 must be considered as the resultant of the following factors. 



Firstly, the true normal earning power of capital. 



Secondly, a premium for risks taken by the investor, which 

 might be considered as a sum making up for the average losses 

 of the investor, or as capital silently refunded to the investor 

 under the mask of a dividend. 



Thirdly, a component making up for the declining power of 

 gold to purchase. 



The state forests in Saxony, which are managed on financial 

 principles, are divided into approximately 100 ranges, each range 



