sive management, meeting only the absolute mini- 
mum needs. 
There are few additional known gains for the 
companies that practice intensive forest manage- 
ment, and they do not need additional help or incen- 
tives. Their biggest concern is that the Gov- 
ernment--both State and Federal--stay out of the 
way and not hinder them by changing the tax rules 
or writing poor regulations or punish them for being 
profitable. 
For the other group of companies, the question 
then becomes, "What is the ideal incentive that 
would motivate owners to capture the growth poten- 
tial of their timberlands?" Not surprisingly, this is 
essentially the same question we have been asking 
about nonindustrial private landowners for many 
years. 
As | watch people try to answer this question, 
two fundamental schools of thought seem to 
emerge. 
The first is that the free enterprise system is not 
sufficient to adequately allocate resources and 
therefore has to be subsidized with government 
“programs.” A corollary to this concept is that the 
more money spent on government programs, the 
more trees. 
The second school of thought is that the free 
enterprise system is the most efficient method for 
allocating resources; and the closer it is to being 
pure, the better it works. Incidentally, the basis for 
the timber assessment market model which formed 
the base case is the specific idea of free markets in 
action with a downward sloping demand curve. The 
purpose of government "programs’ in this context is 
to make sure the buyers and sellers know as much 
as possible about the resource and make informed 
decisions. 
So as | try to answer how to capture these op- 
portunities, | realize there are some big philosophi- 
cal gaps in what should be done. 
Here are my ideas of some attributes of an ideal 
“program": 
1. The "program" should be consistent with the 
business at hand. This means that it would quickly 
expand and contract with business cycles. It would 
provide financial incentives for being successful 
and punish the inefficient. It should also be treat- 
ment- and county resource-specific in order to get 
the maximum impact. 
2. The purpose of the "program" should be strate- 
gically significant to not just local but also world 
34 
markets. It should create exportable volumes and 
products. | do not believe the issue we have to deal 
with is one of supplying enough timber to mills in the 
South. The base case clearly shows that this will 
happen even without the real "incremental" poten- 
tial. Incidentally, | believe there is no way that forest 
productivity can outrun labor productivity in either 
the solid wood or paper business. 
The purpose of any "program" should be to cre- 
ate cost efficiencies clearly greater than those of our 
overseas competitors. 
3. The "program" should be politically attractive to 
politicians, governmental officials, and others with- 
out a stake in timber. This means it would be low 
cost or free, synergistic with nontimber uses, and 
measurable. 
During this meeting, you will hear a lot of Chick- 
en Little tales. Most of you remember the Chicken 
Little fable, where an acorn fell on Chicken Little's 
head, and he went around crying, "The sky is falling, 
the sky is falling!" For us in the forest products busi- 
ness, the parallel to that is, "We are running out of 
trees." The sky isn't falling, and we are not running 
out of trees. What may be a more realistic danger is 
that the chicken will leave the forest 
because of poor and inconsistent government poli- 
cies, the growing cost of doing business, and deteri- 
orating infrastructure. 
Using this ideal "program" model and a scoring 
system from 1 to 10--1 being the worst, and 10 
being the best--let's look at some ideas. The capital 
gains tax benefits for timber is a good example. It is 
a tax incentive and directly related to profits--score 
1 point. It is not a direct incentive to regenerate 
because it occurs at the end of the rotation, but it 
still favors intensive forest management--so score 
another 1 point. It is better than most foreign coun- 
tries' tax systems--add another 1 point. It is obvious- 
ly not politically attractive--no points. Also, it is not 
directly measurable--no points. 
The total score for capital gains is 3. Looking at 
some other programs, | came up with the following 
scores: 
Forestry incentives program 3 
Forest regulation laws 3 
Regeneration tax credit/ 
amortization 6 
Export trading bank/companies 6 
