UNIVERSITY OF ALBERTA
FOREC 345 THE ECONOMICS OF FORESTRY
LEC A1, FALL 2020
COURSE OUTLINE AND READING LIST
Instructor: T.B. (Tim) Williamson, [email protected],
Office hours: Available for one-on-one or group ZOOM sessions or through the “chat app” in eclass
each week on Wednesday from 2:00 – 3:00 pm. I will also be monitoring email through the week.
Lectures: Mon., Wed., Fri. 1:00 - 1:50 p.m. E class
Eclass portal: https://eclass.srv.ualberta.ca/portal/
Course and learning objectives:
To provide you with the ability to view a broad range of forest management problems within an
economic context by introducing you to economic concepts and techniques of economic analysis. More
specifically the completion of this class should allow you to:
1. Apply economic concepts and approaches in forestry related contexts
2. Evaluate forest investments that involve costs and benefits that occur over varying time
scales
3. Understand the concept of economically optimal forest rotation and why it varies from
biological rotations that maximize yield
4. Better understand economic principles related to timber supply and demand and how
prices are determined in competitive markets
5. Better understand economic aspects of concepts such as non-timber values, non-market
values, multiple use, and land valuation and allocation
6. Analyze and understand the economic dimensions of important forestry institutions (such
as forest tenures)
7. Evaluate and understand the socioeconomics implications of climate change on Canada’s
forest sector
PRE-REQUISITES:
You are required to have taken a course in basic economic principles (U of A Economics 101 or
equivalent). You should also be familiar with forestry terminology and physical growth properties of
forests.
COURSE STRUCTURE:
Several avenues of approach will be used to allow you to gain an understanding of economic
concepts and apply them to forestry problems:
Lectures
Lectures will introduce economic concepts and tools for analysis. You will be expected to
actively participate in lectures in several ways:
- Lectures will often pose questions for individual responses and class discussion.
- At the beginning of every lecture, you will have the opportunity to ask questions about
previous material covered.
- You may also ask questions during the lectures.
Guest lectures
Its my hope to demonstrate applications of forest economics theory and concepts to
contemporary forest policy and practices as much as possible. Some contemporary issues affecting
Canada’s forest economy include the role of forests in Canada’s carbon accounts and carbon reporting,
implementing sustainable forest management, Indigenous rights, and climate change adaptation. I intend
to bring in experts to talk to the class about these topics.
Readings
Readings will reinforce concepts introduced in lectures, and supplement subject areas for which
there is not sufficient lecture time. The primary textbook for this course is "Forest Economics" by
Zhang and Pearse.
Assignments
Assignments will provide opportunities to practice applying concepts and tools introduced in
lectures and readings. Due dates will be set when assignments are given.
GRADING:
Assignment 1 5 % (due date TBD)
Assignment 2 10% (due date TBD)
Assignment 3 10% (due date TBD)
Mid-term 1 25% (Oct 5, 2020 Tentative)
Mid-term 2 25% (Nov 16, 2020 Tentative)
Final / mid-term 3 25% (Dec. 7, 2020 – last day of class)
Use of calculators will be permitted for all exam – examinations will take place during regularly
scheduled class hours – including the final exam on December 7 – exam format (e.g. open book or
closed book) remains to be determined -
A grading system of “natural breaks” will be used that will be explained in class.
In fairness to those who turn their assignments in on time, late work will be penalized 10% (of
the possible points for the assignment) per late day (including weekends).
If you need to miss an exam, this must be cleared well in advance for things like important
family events or with a doctor’s notice for illness.
COURSE CONTENT:
The order may change and time may not permit us to cover all topics noted here
1. Forest Economics: Its Scope and Role in Resource Management
What is forestry economics? What kinds of questions does it seek to answer? What special
problems arise in applying economics to forest resources? What is the role of forestry economics in public
policy regarding the management of forests? What differences exist between public and private
objectives? What are the differences between goals based on physical, economic, and social efficiency?
Readings: Zhang and Pearse 2011, Chapter 1
2. Foundations of Economic Concepts
What purpose do the following concepts serve in the logic of economics: opportunity cost?
marginal analysis? sunk costs? the with and without principle? How do these concepts provide consistency
for economic logic? What is the concept of the rational firm and what is its purpose in economics?
Readings: Zhang and Pearse 2011, Chapter 2 (pp. 24-26).
3. Review of the Theory of Production
What is a production function? What are isoquants and how do they represent substitutability of
inputs in production processes? What is the relationship between output and input for efficient firms?
What is an isocost curve? What are the least cost or profit maximizing combinations of inputs? What is
an expansion path? Can time be treated as an input to forest production?
Readings: Zhang and Pearse 2011, Chapter 2 (pp. 26-33 and pp 38)
4. Production Efficiency Over Time: Analyzing Investments
Why are considerations of time factored into production decisions? How can values at different
points in time be compared? What sorts of criteria can be used to aid decisions in making investments?
How can one deal with inflation and uncertainty in investment analysis? Should interest rates be
considered in investment decisions? Why does the cost of time vary between public and private sectors?
Readings: Zhang and Pearse 2011, Chapter 3.
5. Land Values and the Optimum Forest Rotation
What determines the value of forest land? How do you calculate the value of forest land with and
without trees? What is the optimal forest rotation and how can it be determined? How does the optimum
rotation relate to land rents, and the value of timber and timber land? How might a Faustmann rotation
fail to further social objectives?
Readings: Zhang and Pearse 2011, Chapter 7.
6. Timber Supply and Regulating the Rate of Harvest
What distinguishes timber supplies from other types of supplies? What factors influence the market
supply of timber? Why are concepts of stock and flow important to understanding timber supply? How
would a stock of old growth timber be optimally depleted over time? What role do considerations of
sustained yield play in stock depletions? What is meant by economic accessibility and how does it affect
timber supplies? What are the economic implications of sustained yield management?
Readings: Zhang and Pearse 2011, Chapter 4 (pp. 123-134) and 8.
7. Timber Demand and Pricing
How are demand curves derived? Why is the demand for timber referred to as a "derived demand"?
What determines the value of timber? How do governments in Canada determine stumpage prices and
what problems do they encounter?
Readings: Zhang and Pearse 2011, Chapters 4 (pp. 101-123, 134-139) and 10 (pp. 203-
206)
8. Trade in Forest Products
What is Canada’s position in forest products trade worldwide? Why do countries trade? Why is
trade in forest products sometimes restricted? What is the basis for the Canada-US softwood lumber
trade issue?
Readings: Zhang and Pearse 2011, Chapter 12 (pp. 333-341, 343-348).
9. Non-timber Values, Sustainable Forest Management, Trade-offs with Timber and Valuation
What are non-timber values and how are these values reflected in Sustainable Forest Management?
How is Sustainable Forest Management implemented in Canada and how are companies incorporating
non-timber values into their planning and operations? What are some ways of looking at trade-offs
between timber and non-timber values? What approaches are used to evaluate non-market values?
Readings: Zhang and Pearse 2011, Chapters 5 (pgs 140 – 152) and 6 (pgs 175-178).
10. Property Rights and Forest Tenures (note if time permits, we may consider the interaction between
forestry institutions and Indigenous reconciliation)
Why do governments regulate forest practices? How are tenures used as policy tools of regulation?
What types of tenure solutions have been adopted in Alberta? What types of problems do governments
face in designing tenures? What are Indigenous rights on crown land? What is co-management and what
are some recent approaches?
Readings: Zhang and Pearse 2011, Chapters 2 (pp. 40-41) and 10 .
11. Climate Change
What is meant by stationary vs non-stationary climate? What are the implications of
climate change on Canada’s forest sector and on forest economics? How is Canada’s forest sector
responding to climate change? What are resiliency, vulnerability, adaptive capacity, and adaptive
management? How does social learning result in adaptation? What do forest mangers require in
order to identify and implement adaptation? What is the current state of adaptation in Canadian
forestry and what are some future adaptation options? What is vulnerability assessment and how
is it currently being used in Canadian forestry?
Reading: 1. Climate change and Canada’s forests: from impacts to adaptation 2009,
Executive summary, pgs xi-xxi., 2. Adapting to climate change in forest management: Past, present
and future, 2019.
COURSE REFERENCES:
Klemperer, W.D. 1996. Forest Resource Economics and Finance. New York: McGraw Hill. 551p.
Luckert, M.K. 1999. “Stumpage Fee Collection Systems on Public Forest Lands in Canada: An
Overview”. In Economic Rents and Environmental Management in Mining and Natural
Resource Sectors. Eugenio Figueroa B, ed. Santiago: Centre-Universidad de Chile. pp. 317-
332
Nautiyal, J.C. 1988. Forest Economics: Principles and Applications. Toronto: Canadian Scholar's Press.
581p.
Williamson, et al. 2009. Climate change and Canada’s forests: from impacts to adaptation. Available free
of charge at https://cfs.nrcan.gc.ca/publications?id=29616
Williamson, et al. 2019. Adapting to climate change in Canadian forest management: Past, present, and
future. The Forestry Chronicle. 95(2):76-85.
Zhang, D. and Pearse, P.H. 2011. Forest Economics. Vancouver, University of British Columbia Press.
390p.
CODE OF STUDENT BEHAVIOUR:
Please speak with me if you have any questions or concerns about the Code, particularly as it pertains to
assignments.
Academic Integrity
“The University of Alberta is committed to the highest standards of academic integrity and honesty.
Students are expected to be familiar with these standards regarding academic honesty and to uphold the
policies of the University in this respect. Students are particularly urged to familiarize themselves with
the provisions of the Code of Student Behaviour (www.ualberta.ca/secretariat/appeals.htm) and avoid
any behaviour which could potentially result in suspicions of cheating, plagiarism, misrepresentation of
facts and/or participation in an offence. Academic dishonesty is a serious offence and can result in
suspension or expulsion from the University.” (GFC 2003)
Code of Student Behaviour
“All students at the University of Alberta are subject to the Code of Student Behaviour, as outlined at:
http://www.governance.ualberta.ca/en/CodesofConductandResidenceCommunityStandards/CodeofStud
entBehaviour.aspx. Please familiarize yourself with it and ensure that you do not participate in any
inappropriate behavior as defined by the Code. Key components of the code include the following
statements.
30.3.2(1) No Student shall submit the words, ideas, images or data of another person as the Student’s
own in any academic writing, essay, thesis, project, assignment, presentation or poster in a course or
program of study.
30.3.2(2) c. No Student shall represent another’s substantial editorial or compositional assistance on an
assignment as the Student’s own work.”
