﻿MAKING 
  ECONOMIC 
  EVALUATIONS 
  

  

  Economic 
  evaluations 
  can 
  be 
  made 
  in 
  a 
  

   variety 
  of 
  ways. 
  1 
  The 
  rate 
  of 
  return 
  on 
  in- 
  

   vestment 
  is 
  the 
  method 
  most 
  commonly 
  used 
  

   to 
  evaluate 
  alternative 
  opportunities 
  to 
  spend 
  

   money 
  to 
  achieve 
  specified 
  goals, 
  and 
  this 
  is 
  

   the 
  method 
  discussed 
  in 
  this 
  paper. 
  Rate 
  of 
  

   return 
  considers 
  costs, 
  value 
  yield, 
  and 
  time 
  

   to 
  indicate 
  the 
  rate 
  at 
  which 
  value 
  grows. 
  

   This 
  in 
  turn 
  indicates 
  some 
  rate 
  of 
  efficiency 
  

   of 
  money 
  use. 
  

  

  Other 
  methods 
  of 
  evaluation 
  could 
  be 
  

   used. 
  For 
  certain 
  projects, 
  the 
  least-cost 
  ap- 
  

   proach 
  would 
  be 
  appropriate. 
  If 
  the 
  goal 
  were 
  

   merely 
  to 
  cut 
  over 
  a 
  stand 
  and 
  regenerate 
  a 
  

   new 
  stand 
  of 
  trees 
  to 
  meet 
  the 
  requirements 
  

   of 
  multiple 
  land 
  use 
  objectives, 
  the 
  species 
  

   or 
  species 
  combination 
  that 
  could 
  be 
  estab- 
  

   lished 
  at 
  least 
  cost 
  would 
  be 
  a 
  natural 
  choice. 
  

   Such 
  a 
  decision 
  disregards 
  differences 
  in 
  yields 
  

   of 
  values 
  that 
  would 
  be 
  generated 
  for 
  the 
  

   money 
  spent 
  and 
  the 
  length 
  of 
  time 
  required 
  

   for 
  yields 
  or 
  values 
  to 
  accrue. 
  If 
  these 
  con- 
  

   siderations 
  are 
  unimportant, 
  the 
  least-cost 
  

   decision 
  is 
  valid. 
  

  

  In 
  some 
  situations, 
  estimated 
  future 
  yields 
  

   and 
  values 
  could 
  be 
  compared. 
  If 
  cost 
  were 
  

   no 
  object, 
  the 
  species 
  estimated 
  to 
  provide 
  

   the 
  greatest 
  yield 
  or 
  value 
  would 
  be 
  rightly 
  

   chosen. 
  But 
  again, 
  this 
  kind 
  of 
  evaluation 
  

   ignores 
  time; 
  only 
  if 
  it 
  made 
  no 
  difference 
  

  

  4 
  Marty, 
  Robert, 
  Charles 
  Rindt, 
  and 
  John 
  Fedkiw. 
  

   A 
  guide 
  for 
  evaluating 
  reforestation 
  and 
  stand 
  im- 
  

   provement 
  projects 
  in 
  timber 
  management 
  planning 
  

   on 
  the 
  National 
  Forests. 
  U.S. 
  Dep. 
  Agr., 
  Agr. 
  Hand- 
  

   book 
  304, 
  24 
  pp. 
  1966. 
  

  

  whether 
  the 
  yield 
  would 
  be 
  available 
  at 
  50 
  

   or 
  100 
  years 
  could 
  the 
  decision 
  stand. 
  

  

  In 
  another 
  method, 
  the 
  benefit-cost 
  com- 
  

   parison, 
  future 
  values 
  are 
  not 
  discounted. 
  The 
  

   species 
  or 
  combination 
  that 
  promises 
  the 
  

   greatest 
  volume 
  or 
  value 
  yield 
  for 
  the 
  money 
  

   is 
  the 
  obvious 
  choice. 
  This 
  method 
  also 
  ig- 
  

   nores 
  the 
  time 
  required 
  to 
  attain 
  the 
  yield 
  

   or 
  value. 
  

  

  An 
  evaluation 
  procedure 
  is 
  outlined 
  in 
  fig- 
  

   ure 
  3. 
  The 
  diagram 
  shows 
  the 
  sequence 
  of 
  

   calculations 
  that 
  produces 
  estimates 
  of 
  yield 
  

   and 
  rate 
  of 
  return 
  for 
  each 
  species 
  to 
  be 
  

   evaluated, 
  under 
  managed 
  or 
  unmanaged 
  con- 
  

   ditions. 
  With 
  site 
  index 
  and 
  productivity 
  

   data, 
  the 
  comparative 
  productivity 
  of 
  the 
  

   species 
  to 
  be 
  evaluated 
  may 
  be 
  estimated. 
  A 
  

   decision 
  is 
  then 
  made 
  as 
  to 
  initial 
  number 
  

   of 
  trees 
  per 
  acre 
  to 
  be 
  assumed 
  in 
  the 
  evalu- 
  

   ation. 
  Following 
  the 
  decision 
  to 
  manage 
  the 
  

   stand 
  or 
  to 
  leave 
  it 
  unmanaged, 
  yield 
  data 
  

   or 
  stand 
  projections 
  (based 
  on 
  assumptions 
  

   of 
  management, 
  tree 
  growth, 
  and 
  mortality) 
  

   are 
  taken 
  together 
  with 
  the 
  number 
  of 
  trees 
  

   per 
  acre 
  to 
  calculate 
  expected 
  yield; 
  for 
  the 
  

   stand. 
  On 
  the 
  basis 
  of 
  this 
  anticipated 
  yield, 
  

   timber 
  growing 
  costs 
  and 
  product 
  values 
  gen- 
  

   erated 
  are 
  taken 
  together 
  to 
  calculate 
  a 
  rate 
  

   of 
  return 
  for 
  the 
  species. 
  This 
  procedure, 
  

   carried 
  out 
  for 
  each 
  species 
  to 
  be 
  considered, 
  

   gives 
  the 
  timber 
  manager 
  a 
  comparative 
  

   measure 
  of 
  the 
  efficiency 
  of 
  a 
  stand 
  estab- 
  

   lishment 
  operation 
  in 
  terms 
  of 
  rate 
  of 
  return. 
  

   The 
  outline 
  in 
  figure 
  3 
  is 
  an 
  idealization 
  of 
  

   the 
  method; 
  it 
  assumes 
  a 
  foundation 
  of 
  con- 
  

   sistent 
  biological 
  data 
  and 
  value 
  assumptions 
  

   on 
  which 
  to 
  base 
  expected 
  value 
  returns. 
  

  

  11 
  

  

  