How to see the forest for the trees: new textbook helps to craft a global understanding of forest economics for all stakeholders

By: Gabriel Thoumi and Brian Loux
November 13, 2012

A book review of: William F. Hyde's The Global Economics of Forestry

Jungle in Malaysian Borneo. Photo by: Rhett A. Butler.
Jungle in Malaysian Borneo. Photo by: Rhett A. Butler.

Environmental economics is similar to other expanding fields, it turns out. For example, Tauhid Zaman, assistant professor of operations management at the MIT Sloan School of Business, lamented that network analytics far too often focuses on the purely theoretical, and quipped that his colleagues "want to date a model more than they want to model data." William F. Hyde might argue that the same could be said for environmental economists. In his excellent book The Global Economics of Forestry, Hyde has done more than lay out the paradigm that unites the biology and bounty inherent in global forests with market economics that utilize the resource. He has gone to painstaking efforts to compile literature, sometimes spanning centuries, to identify where human experience matches or defies our modeled understanding of forest-related markets. Yet even despite this Herculean effort, Hyde recognizes the ambiguity of much study to date, and he explicitly acknowledges the need for further research. What Hyde has created then is our platform from which we can analyze more completely the utility of global forests.

Hyde succinctly tackles the breadth of topics which comprise a field which has seen its sub-disciplines expand over recent years. The book starts with the establishment of an economic model to qualify forested land use, followed by an effective establishment of tiered forest management "phases," which details how communities develop from impoverishment focused on agricultural frontier exploitation towards a robust economy focused on sustainability practices. Subsequent chapters delve further into management and policy practices followed by unraveling the primary and spillover effects they have on forest robustness. Hyde also comments upon the impact of macroeconomic trends on localized forest management, behaviors of certain owners and stakeholders in global forests, and he then closes with a reflection upon how forest management practices might impact those populations that live within or adjacent to the Earth’s forests. Each section takes time to provide appendices and case studies to further drill down and examine where the theoretical meets the practical.

While this is a textbook clearly intended for the student with an economics or mathematics background, the case studies and latter chapters remain accessible to a non-technical audience. Policy makers and program managers can find important key takeaways from sections that discuss climate change mitigation, watershed protection, and logging contract development. The Global Economics of Forestry could therefore be considered as supplemental for many managerial and policy courses focusing on natural resource or environmental protection.

When detailing case studies, forest policies, and macroeconomic trends, it is here where Hyde's effort truly shines. Economists will rejoice upon seeing not only clear examples, but regressions and coefficients detailing the relationships observed in actual forested lands. Most striking is the example of China's Hainan Island, which transformed itself from a degraded tropical rainforest to a robustly-managed source of economic growth along with the rest of the country. The charge is left to readers to effectively bring these observations in line with our current economic understanding of forests.

While promoting the use of data and case studies in establishing a model for management, the book regrettably seems averse to questioning the merits of its own core model. Despite calls for continued research and development of forest economic models, there is little discussion to suggest Hyde's adaptation of von Thunen's economic geography model of the 19th century might require further tweaking. In short, Hyde models forested land use choice as a function of distance from the commerce center. That is, because of the value of agricultural products, the value of forest products, and the costs of property rights per unit land, development is generally likely to follow a concentric-ring pattern. Dwellings and market places form the center, farmland surrounds it, open-access forest surrounds that layer, and finally forested wilderness is found even further out. While strikingly effective for subsistence economies, several developing world case studies, and historical examples, questions abound once an economy reaches further levels of development as seen in America and Europe. The model seems ill-suited to explain Manhattan's Central Park, or California's wine-growing regions, or even a typical suburb. To qualify forest planning in the first world as curve shifts on this model is insufficient.

Similarly, the identification of which forest management phase a nation or community has entered remains less of a metric and more of an intrinsic feel that reflects the entity's entire economy. As useful as the phases are in identifying where a community stands in terms of its forest management practices, and thus identifying what policy prescriptions are most appropriate, it is equally critical to measure how effectively it can progress from a new frontier to a developing frontier to a mature frontier. Herein lays yet another problem where the solution yet again is more research and more analysis.

Above all, Hyde's work remains pensive rather than prescriptive in tone. It does not call for a stop to narrow regulatory approaches, but rather marvels at how a preponderance of literature demonstrates that many policy prescriptions seeking to protect the forest find themselves counter-productive. Tax reform may be an appropriate measure for institutional investors, such as pensions fund managers, who have used forest landholdings to generate an above-market return for below market risk, but Hyde prefers instead to document the history of those investment lands' returns. The text does not intend to serve as a laundry list of policy recommendations, but as a platform from which analysts can craft good policy. The tone fits well with the ultimate question of environmental finance that Hyde is asking: how the benefits inherent in environment can be appropriately incorporated alongside its exploitation for economic gain.

The citation list alone shows that in writing The Global Economics of Forestry, Hyde has clearly done his homework. Here is to hoping that his labors help the next generation of environmentalists and economists to do theirs.

How to order:

The Global Economics of Forestry
Author: William F. Hyde
Publisher: RFF Press
ISBN: 978-0415518284
Pages: 496 pages

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By: Gabriel Thoumi and Brian Loux (November 13, 2012).

How to see the forest for the trees: new textbook helps to craft a global understanding of forest economics for all stakeholders.