National forests.

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    I have just returned from a camping trip in the monongahela national forest in West Virginia. While there we stumbled upon the Gaudineer Scenic Area which is a portion of virgin forest, which during the industrial revolution, was spared from clear cutting due to a surveying error. It is implied and we are told that private companies cut down this huge red spruce forest with reckless abandon because of greed and profit.

    I thought this was a bit suspicious, wouldn’t the market rate of the trees increase ceteris paribus as they cut them down until the loggers would no longer be able to pay for them? Why would the entire forest be cut down with reckless abandon.

    I read that with white pine quite they were not very efficiently cut and left with large stumps and they would log twice or even three times to get at the remnants of the prior loggings quite often at greater profit… This leads me to believe although I can’t be sure the change in demand that the price of the land the loggers paid originally was far far below market equilibrium. Then I found out about stumpage fees set by govt….so is it the case the us govt basically subsidized the logging efforts and what we are seeing here is kind of a tragedy of the commons?

    Another funny side note. It’s quite possible that some of the wood from this forest was used to build my house as it was build in 1908…I read that a lot of it was used in pittsburgh (where i am) and all the pine in my house is a weird red color.


    I don’t know the history of this case in particular, but there are several instances in which governments leased timber and mining rights to companies instead of privatizing the land. In those cases, the forests tend to be clear cut and mines wastefully exploited because there was no private owner of the land and therefore, no one had a monetary incentive to account for the market price of the land itself. This is a case of the so-called tragedy of the commons.

    A famous illustration is the terrible Pishtigo fire of 1871 in Wisconsin.

    In contrast, companies that own their forest and mine land do not damage the market value of the land in these ways, Georgia Pacific for example.

    Alternatively, as you point out, government subsidies may be to blame. Also, if timber companies know that the government is buying land titles, they would have incentive to clear cut and then sell to the state. Governments might buy even if the market value of the land to commercial owners has been, at least temporarily, destroyed by clear cutting.

    Here’s a brief history of land ownership in West Virginia. A fifth of the land in West Virginia is still owned by governments. The Monongahela National forest was established in the early 20th century on land owned by Senators Davis and Camden, among others.

    Here’s a nice introduction to free market environmental policy.

    And here’s a more scholarly treatment of private property and land use.

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