Public Timber Supply, Market Adjustments, and Local Economies: Economic Assumptions of the Northwest Forest Plan

Abstract:  The Northwest Forest Plan in the Pacific Northwest sought to stabilize local economies, including local employment and income, by stabilizing the flow of wood fiber from public forests. This is also a common forest management objective in other regions and countries. Because this economic strategy ignores basic market adjustments, it is likely to fail and to unnecessarily damage forest ecosystems. Application of basic economic principles on how markets operate significantly changes the apparent efficacy of efforts to manage local economies by managing timber supply. The emphasis on timber supply tends to ignore the dominant role that the demand for wood fiber and wood products, rather than wood-fiber supply, plays in determining levels of harvest and production. Contemporary economics indicates that markets tend to operate to offset reductions in wood-fiber supply. This significantly moderates the economic cost of reducing commercial timber harvest in the pursuit of environmental objectives. In addition, contemporary economic analysis indicates that the economic links between natural forests and local communities are much broader than simply the flow of commercially valuable logs to manufacturing facilities. At least in the United States, the flow of environmental services from natural forests has increasingly become an amenity that has drawn people and economic activity to forested areas. Attractive site-specific qualities, including those supported by natural forests, can potentially support local economic development even in the face of reduced timber harvests. These market-related adjustments partially explain the Northwest Forest Plan's overestimation of the expected regional impacts associated with reduced federal timber supply and the ineffectiveness of the plan's efforts to protect communities by stabilizing federal timber supply.