An Opportunity Cost Criterion for Scheduling Timber Harvest: A Comparison of Area and Volume Based Approaches

This paper develops an economic criterion for scheduling timber stands for harvest when there are upper limits on the timber volume harvested in a period. The opportunity cost of delayed harvest is used to rank the harvest priority for stands: those with the highest opportunity cost are to be harvested first until the upper limit on volume is reached or there is no available wood with a positive opportunity cost of delay. The paper comapres the effect of ranking stands for harvest by opportunity cost per cubic metre (m^3) and by opportunity cost per hectare (ha). The opportunity cost per ha ranking in clearly inappropriate when periodic harvest colume constraints are used. However, because of the spatial orientation of forest management, it is tempting to use the opportunity cost her ha measure. This paper shows that when stands are ranked for harvest by opportunity cost per m^3, a wider variety of timber types and site classes are scheduled for harvest than when the opportunity cost per ha criterion is used. This mix of timber types and site classes corresponds with the observed harvest behavior of logging firms. Other authors have argued that the wide mix of timber actually harvested by logging firms is driven by non-economic considerations. It is argued here that this harvest variety can be attributed to economically rational behaviour.