22 FOREST FINANCE 



2. Destructive Forestry. 



The net revenue cannot be separated easily from the capital gradually 

 withdrawn from the forest. If only soil (S) remains after complete exhaus- 

 tion, within (n) years, of a forest of the original value (Q) whilst surplus re- 

 ceipts, Ri, R2, Rs, etc., are obtained during the (n) years of destructive lum- 

 bering, then the rate of interest, (x), is illustrated by the following equation: — 

 0Xl.Ox°=Ri (1.0x°-^)+Ra (1.0x'»-*)+Rs (1.0x°-»)+ . . . Rn + S. 



XI. — Saxon Statistics show: — 

 1. That the State forests have paid, since 1816, 2% net on the annual 

 average. 

 2. That the money value of the forest, since 1816, has risen by 3% on 

 the annual average, a rise largely due to the declining purchasing 

 power of gold and partly due to improvements and additional in- 

 vestments. 

 XII. — ^The decision in the problem confronting the owner: "Shall I practice 

 conservative forestry or destructive forestry?" must be based on the true 

 rate of net interest obtainable from the one and from the other. It re- 

 mains for the forester to demonstrate the difference between net interest 

 and gross interest. 



The chances for conservatism in forestry to be superior to radicalism 

 are, on the whole, extremely good and especially so in the United States, since 



1. The American lumber market is almost continuously overstocked 



beyond its digestive capacity. The virgin supplies are being ex- 

 hausted, and are apt to be entirely exhausted by 1950. In the mean- 

 time the stumpage prices of all good timber must increase steadily. 



2. It must be remembered that the now wealthy lumbermen have made 

 their wealth by buying stumpage when and where it was under- 

 valued and by holding it for a number of years. Fortunes have 

 never been made by any particular skill in lumbering, milling or 

 sale of lumber. 



Strange as it may sound: Inactivity has paid better in the case of in- 

 vestments in American forestry than hard work spent in lumbering and milling. 

 There is no reason to anticipate that the future will materially differ 

 from the past. 



Xm. — ^Interpretation of the rate of interest on which a calculation is based : 

 X 



1) The sum may mean 



l.op° 



a) that the calculator expects with a faith in his forecasts expressed 

 by p% receipts or expenses (X) tp occur (n) years from date 

 of calculation, or 



b) that the calculator expects, with a faith in his forecasts approx- 

 imated by {p+j), receipts or expenses 



X 



or XxLoy" 



l.oyn 

 to occur n years from date of calculation. 



