Bernhard Möhring

The German struggle between the ‘Bodenreinertragslehre’ (land rent theory) and ‘Waldreinertragslehre’ (theory of the highest revenue) belongs to the past — but what is left?

Abstract The beginning of the land rent theory is closely related to the German forest economists Friedrich Wilhelm Leopold Pfeil and Johann Christian Hundeshagen (1828) . It was further developed by Gottlob Konig (1864) , Johann Heinrich v. Thunen, Max Robert Presler, Gustav Heyer, Max Endres and in particular by Martin Faustmann (1849) . His 1849 published and well known formula may be seen as the center of the land rent theory. However, the application of this concept demanded a considerable change of forest management practice due to the reduction of usual rotations and stocking density. Eventually, the land rent theory conflicted with the principle of sustained yield which had become the central idea of forestry in Germany in the 19th century. Since forestry under German conditions did not start as an investment on bare forest land, but had to manage existing forests under the principle of sustainability, the theory of the highest revenue seemed to be a more appropriate guideline for forestry. However, the maximization of the highest revenue assumed a marginal interest rate of 0% because the time span between input and output was not considered. Besides that, this principle also conflicted with the reality of forestry, because the scarcity of financial funds was not regarded. So far, both theories have not delivered solutions useful to real forest economic decision problems in Germany. Using an example from Lower Saxony, it is demonstrated that considering the objective of sustainability leads to results which are in accordance with the reality and the economic theory.

The Relevance of Economic Data from Forest Accountancy Networks for Forest Management, Research and Politics Consultation

Multifunctional forestry in Germany is characterized by long production periods and highly complex biological–technical processes. Therefore forest enterprises are complex systems, which are closely intertwined with their economic environment. To ensure their economic success, forest enterprises and forest policies need to take the economic development into consideration. The cost accounting scheme of the German Forestry Council provides a basis for management accounting in multifunctional forest enterprises and distinguishes five different production areas whereby intercompany comparisons of different kinds of ownership in forest accountancy networks (FANs) are possible. Results from such a FAN are used to illustrate the economic situation and long-term development of a panel of private forest enterprises. As well these data can support decision-making processes of individual enterprises, forest economic analyses and consultation in forest policy analyses.

Analysis of a long-term Forest Accountancy Network to Support Management and Controlling

Abstract Multifunctional forestry in Germany is characterized by long production periods and complex biological-technical processes. Private forest enterprises are complex systems which are closely interwoven with the economic environment. To ensure their economic success, forest landowners need to take the economic development into consideration and adapt their management strategies. Management accounting is an important source for information needed to fulfil main tasks of accounting that help to manage forest enterprises: ‘description’, ‘explanation’ and ‘decision making’. To get general data, long time series data, taken from Forest Accountancy Networks (FAN), can be analysed. For more than 45 years, data from the FAN Westfalen-Lippe in Germany has been collected and analysed by the department of Forest Economics and Forest Management at the University of Göttingen. The long-term development and adaptation strategies of defined groups of private forest enterprises can be illustrated using this data. These valuable time series can support decision-making processes for private forest landowners and provide tools for forest policy. The data shows that private forest enterprises, with spruce as the dominating tree species, have performed above average in terms of operating revenues and profit margins, but are also more susceptible to calamities resulting in higher involuntary timber harvests.

A practical way to integrate risk in forest management decisions

Key messageThe concept of expected losses is an appropriate measure for integrating risk in the determination of the optimal rotation period and choice of tree species.ContextNatural threats are challenging forest management decisions. Essential decisions about the optimal length of a harvest period are often taken without considering risks.AimsHere, a practical and easy to apply way to integrate risk in these decisions is shown. Furthermore, it is seen how the rotation period changes according to the risk-type and risk-level.MethodsThe marginal principle of Preßler’s indicator rate is developed further by including the concept of expected losses, leading to an optimal harvest age under risk. The application of the new formula is shown by a simulation, which also visualises the influence on the optimal rotation age.ResultsWhether risk influences the optimal harvest age compared to a risk free solution, depends on the relationship between expected losses in terms of land rent of the succeeding stand and expected losses in terms of value growth of the existing stand. If they are equal, the rotation age stays. If the expected loss on value growth is bigger than on land rent, the rotation period will be shorter, while it will be longer if the relation is inverse.ConclusionThe concept of expected losses can be applied to practically determine the optimal rotation period under risk.