BY BERNARD FRANK
THE important role of wood in World War I belied the complacent opinion - in the United States of America at least - that the depletion of this resource was of little consequence. The even greater part played by wood in World War II and the effects of present timber shortages have driven home hard the lesson that without plentiful supplies of this strategic material the march toward world recovery and more peaceful international relations may be seriously, perhaps indefinitely, retarded.
When one speaks of wood one inevitably thinks of the forests that produce it. And when forests are discussed there inevitably come to mind the many other functions performed by the tree- and shrub-growing areas of the earth. It is precisely this characteristic which so firmly establishes the widespread social value of forest land.
Within the United States, as in many other parts of the world, the public interest in such land is well established. It extends to all elements of that national resource. The prime recreational qualities of the forest environment, its high wildlife habitat values, and its beneficial influences upon water flow, especially the last, are well recognized in the basic forest legislation of many countries. The first forest reserves in the western United States and the first national forests in the East were set aside or acquired entirely for watershed protection. Some areas had practically no commercial timber on them at all. These attributes of forest land have all been recognized in policy formation, land planning, protection, and management. They have been considered, if only qualitatively, in estimating the effects of fire and other damages to forest cover.
Professional forestry thinking, however, has by and large centered upon timber values.1 Our national efforts to improve the care and handling of forests and our concern over the problems and responsibilities of their ownership have related primarily to the question of timber supplies. Timber conservation has furnished the dominant motive for forest development policies and for public and private expenditures to protect, improve, and maintain the cover. Although other benefits have been cited in support of forest conservation proposals, it has been sincerely believed that, if forested areas were properly handled for continuous timber production, the noncommercial or "intangible" values would automatically be safeguarded. In the main, this belief is essentially sound, but in many instances critical climatic, soil, or other physical conditions may require considerable modification of cutting and skidding practices in the interest of maintaining forest stability.
1
This article is devoted primarily to forest-covered lands although the basic principles and problems discussed are generally applicable to brush and rangelands also.
The strong tendencies to identify the forest resource in terms of timber alone are understandable. Timber is the most obvious product of forest land, and commonly the chief source of its marketable wealth. Its negotiable value has constituted a key incentive to the ownership and operation of forest land for profit or revenues. On the other hand, the nontimber values, lacking financial appeal, have been neglected accordingly. The traditional outlook and predominant training of both European and American foresters in timber management and utilization can readily be rationalized on such grounds.
Today, however, the rapidly growing dependence upon the other values and the sharpening conflicts among various forest-using interests are rapidly creating a broader concept of forestry. This marked trend reflects the many doubts which have arisen as to whether timber considerations alone can safely assure the proper functioning of the forest as a whole. It has also stimulated a greater interest in more effectively expressing forest values previously regarded as "intangibles" or ignored altogether.
The specific effects of forest growth and the underlying ground cover upon fish and wildlife habitat, local climate, flood discharges, sedimentation, and water supplies are only gradually becoming known. Scientific evidence has been accumulated and public interest generated to such an extent, however, as to focus serious attention upon these aspects. Experimentation and research and investigations of damages originating on forest watersheds are raising serious questions on the adequacy of current standards of fire control; timber, livestock, and big game management; road and trail construction; and recreational uses and improvements.
If timber production alone can no longer guide the course of forest policy, and if the desirable extent of public activity in forest rehabilitation, protection, and management is to be judged on broader grounds, how are the less obvious values to be taken into account? Can they also be measured in direct dollar terms for comparison with commercial forest products? Can the public interest in them be as readily ascertained as where timber is concerned? How can we assure that these values will be given adequate recognition in public policy determinations?
The answers must be sought in a sound understanding of the biological nature of the forest, with particular emphasis upon the interrelations among its several functions. A critical examination of the premises underlying the commonly accepted methods of forest resource evaluation is also required. These observations apply equally to the appraisal of timber and nontimber values.
The continued usefulness of Lake Mead, above Boulder Dam, is being imperiled by rapid siltation
Unlike timber, whose harvest provides immediate and direct gain to the owner, the benefits of the other services accrue largely to individuals remotely situated from the forest itself or to the general public. In some instances the landowner may derive income from them, as through the lease of grazing, hunting, or fishing privileges, or through the sale of water, as by a private utility. Nevertheless, even in such cases the public has a large stake in maintaining the forest resource because of its many indirect or secondary benefits. It yields timber whose utilization provides employment and community income and meets the national and world-wide need for wood; it offers recreation which is necessary to our national health and welfare, and also supports an important industry; it reduces erosion, flood, and sediment damages and in this way protects the security and welfare of the nation; it provides good water supplies which are vital to civilization.
The above values are commonly not recognized in American forest finance. For all practical purposes forest finance - as part of the broader field of private finance - has been developed as a guide to private investment in timber. As such, it fails to reflect the social values and even all the affected property values inherent in the timber resource, as well as the other forest resources.
The basic premises of forest finance include:
1. An assigned stumpage value. In the case of young growth or other presently inoperable timber, a future market value is usually assumed, based on current or predicted stumpage prices.2. An assumed commercial interest rate.
3. The applicability of one of several purely mathematical formulas for determining present worth or future value, as the case may be. These premises are commonly applied whether the timber is publicly or privately owned. Where timber is publicly owned, a lower rate may be employed. With this single exception, however, the same premises and the same mathematical formulas are used.
Inherent weaknesses in the above premises include:
1. The uncertainties of predicting future stumpage values, especially for periods over 25 years.2. The assumption that whatever interest rate is selected for computation purposes will remain applicable throughout the evaluation period.2 In a dynamic society, interest rates, like other money prices, are affected by fluctuations in the many complex factors operating in a free economy. Also, the opportunities for continued returns on a given investment tend strongly to decrease with lapse of time.3 Taking into account the ups and downs of the business cycle, it appears debatable whether capital investments over a long period earn anything like the returns indicated by compound interest calculations.
3. The assumption that equally good investment opportunities are available. So far as our land and water resources are concerned, it is questionable whether this assumption is valid in the face of nationwide timber and soil depletion.
2Use of the annuity formulafor determining the present worth of commercially immature stands avoids this difficulty in part by indicating an increasing rate of capital value accumulation as the stand approaches maturity, hence representing a decreased investment risk. Nevertheless, this formula too is subject to the weakness of employing a fixed discount rate over the entire period involved. It indicates an even lower value for small timber than the expectation value formula, a value however, that is more in line with commercial rates.
3 In one study of municipal reservoir sedimentation the discount rate used to arrive at present worth varied with the time involved. Where useful reservoir life ranged from 1 to 25 years, the rate was 4.5 percent; for, periods from 26 to 100 years, 3.5 percent; and for longer periods, 2,5 percent. The viewpoint of this study was that of the municipal reservoir owners. Garin, Alexis N., and B. P. Gabbard. Land use in relation to sedimentation in reservoirs, Trinity River Basin Texas. Bull No. 597, Tex. Agr. Exp. Sta. Jan. 1941.
The above comments apply commonly to the financial evaluation procedures now in general use, whether for public or private purposes. Where the public is involved, however, several additional elements enter in.
In the first place, discount rates based on individual time preference do not represent the public attitude towards national resource conservation. This attitude is best expressed as social time preference, which is something far different. Such preference is determined by how much society as a whole is willing to forego in material consumption today in order to provide for the needs of future generations. Questions of risk, profit, and other elements which affect the choice of individual time preference do not affect these considerations. the contrary, social time preference is more indicative of the risk to the national welfare of not providing today for the needs of tomorrow.
No one can be certain what quantitative rate - if any - would best represent society's time preference. Federal agencies are gradually adopting the yield rate of long-term Government bonds as an approximation. Some economists have suggested the applicability of a zero discount rate or even a negative rate for certain social purposes such as public health, defense, or education.4 The zero rate at least is held to be equally applicable to the conservation of scarce or shrinking natural resources. The least that can be said for social time preference is that it provides a far more adequate expression of the public need for resource conservation - even where only timber is involved - than do any of the approaches based upon individual time preference.
4
S. V. Ciriacy-Wantrup, "Private Enterprise and Conservation," Journal of Farm Economy 24, 1 (1942).
The inadequacies of orthodox evaluation procedures become even more glaring when applied to the forest resource as a whole. From time to time efforts have been made to determine how much forest land should be retained nationally or within given regions to provide " economic " sources of timber supplies. Costs and returns of timber growing have been selected as the sole criteria. The extent to which the need for other services might make it desirable to retain or develop a forest cover, regardless of its ability to grow good timber, was overlooked. Yet in some instances these other services may be, and often are, of greater public importance than timber production. Forests are also necessary to assure more satisfactory water supplies, to reduce flood and sediment damages, to maintain favorable local climate, and to provide fish and wildlife habitat or recreational environment. Single-purpose evaluation of a resource which is fundamentally multiple-purpose in character can only lead to fallacious conclusions.
The determination of the value of forest land as a biologic complex calls for a quite different approach than that indicated by commercial practice. It requires the adoption of an over-all viewpoint in which the several components of the forest and their interrelations are fully recognized. Such an approach rests on the biologically - and socially - sound premise that all the elements depend upon each other for their proper functioning. It recognizes that where watershed values are important, determinations of fire control and of timber management policy and expenditures must consider soil stability and desirable water flow conditions. Clearly other premises than those of private forest finance must be established and better methods developed for expressing the public interest in forest resource conservation.
Such methods are currently being developed in the watershed flood control survey program of the U. S. Department of Agriculture. The Omnibus Flood Control Act of 1936 which authorizes this activity states that the Federal Government should improve ".... navigable waters.... including watersheds thereof..... if the benefits to whomsoever they may accrue are in excess of the estimated costs, and if the lives and social security of people are otherwise adversely affected. "5
5
Public Law No. 738 74th Congress. Sec. 1.
Since 1938, when surveys first started, evaluation practices have undergone considerable evolution. The earliest evaluations employed commercial discount rates and computed cost-benefit ratios for individual measures although they were biologically interdependent. The less obvious direct and indirect benefits were usually ignored.6,7
6
Bernard Frank, "Some Aspects of the Evaluation of Watershed Flood Control Projects," Journal of Land and Public Utility Economics, 18, 4 (1942),
7 Bernard Frank and E. N. Munns, "Watershed Flood Control: Performance and Possibilities," Journal of Forestry 43, 4 (1946).
The determination of damages and of costs and benefits from unified watershed remedial programs requires careful study of many factors contributing to erosion. floods, and sedimentation. "The damage appraisals must relate to the flood flow and sediment measurements of the hydrologists and geologists and in turn to the findings of foresters, soils specialists. agronomists, and others concerning upland soil and cover conditions. Measurements of soil and water losses are related to soil and cover types as influenced by climate and use, and in turn to the magnitude of flood discharges.... ''7 Benefits derived from the program are based chiefly upon reductions in flood and other downstream damages, increased productivity of the treated watershed lands, and increased returns from water conservation. Costs include outlays of money, labor. and materials by all participants.
7
Bernard Frank and E. N. Munns, "Watershed Flood Control: Performance and Possibilities," Journal of Forestry 43, 4 (1946).
Damage Appraisals
Forest watershed lands influence flood flows and sedimentation through the manner in which they dispose of rain or snowmelt. The extent of this influence is determined by the interactions of climate, physiography, soils, and plant growth and its litter, as modified by human activity. The relative contribution of a drainage area to flood discharges depends in part upon the ability of the soil surface to take in water, upon the soil's capacity to transmit it downward, and upon the soil's water-holding ability. These factors vary with condition and density of the total plant cover, including litter and root systems, with soil structure and texture, especially as affected by compaction and organic matter content, and with depth to the impermeable layer. Run-off over the surface (overland flow) occurs whenever the rate of rainfall or snowmelt exceeds the rate at which the soil surface can take in the water. Surface run-off can also occur if more rain is falling than can be transmitted downward through the Foil mass, causing a spill-over of the excess supply. Surface run-off is the most destructive form of water movement. It is largely responsible for sheet and gully erosion and the rapid formation of flood peaks.
Flood discharges can also result from subsurface flows, as from soils with an impermeable layer near the surface. Such soils may have high infiltration and percolation rates, but the permanent (capillary) storage capacity above the impermeable layer is soon used up, and the excess water may quickly collect into channels to build up peak flows. A major difference between such subsurface (or quick return) flow and storm surface run-off (or overland flow) is that the former infrequently causes erosion as it moves downward to the watercourses.
Good forest cover plays an important role in building up the soil's ability to handle precipitation. Surface run-off rarely occurs. The complete litter cover, the mass of living and dead roots of trees, undergrowth and ground cover. and the pore spaces and soil aggregates resulting from the high level of desirable organic activity create optimum conditions for infiltration, percolation, and water storage at all seasons. During the growing season, the soil storage capacity is maintained at the highest level by continuous transpiration losses. The flood control survey of the Potomac River watershed, for example, revealed that 17 inches (43 cm.) of water, or one-third of the total rainfall, transpired annually from well-stocked mature hardwood cover.
As the total forest cover and its soil deteriorate, their influence on flood flow reductions is materially decreased. Serious erosion, debris movements, and rapid peak flows may originate on forest areas containing good timber where, because of. improper logging practices, repeated ground fires, or overgrazing by livestock or big game, the litter, humus, and mineral soil have been dissipated or compacted. Similar results generally obtain following the improper use of crop, pasture, or range lands.
Determination of the flood source areas requires a division of the watershed into various combinations of soil and cover. The relative flood contribution of each major soil-cover group to the flood flows recorded at stream gauges is arrived at by hydrologic procedures. These contributions are worked out for storms of given size and season. Damaging sediments are similarly traced back to their sources on the slopes and in the stream channels.
Flood flows occur at varying magnitudes and frequencies throughout the year and over a period of years. These variations - apart from the influence of watershed conditions - result from differences in amount and intensity of precipitation. No method has been discovered for predicting when future flood producing storms will occur. For this reason, an established practice is to develop discharge-damage curves from past flood records to indicate the probable frequency of given-sized flows and the expected damages over a given period. Future average annual damages are generally estimated simply by dividing the total calculated losses for the period by the number of years.
No discounting is applied in this process; no calculations of present worth are attempted. To do so would require knowing when future floods were likely to occur. The present worth of future damages from, say, a 100-year flood would be very large or very small, depending, for instance, on whether it was assumed to take place next year, 50 years hence, or 100 years hence. Under such circumstances the use of refined evaluation procedures is clearly unwarranted.
Reservoir Sedimentation
Another type of damage is the loss of reservoir storage capacity by sedimentation. Reservoir surveys, or measurements of average sediment production rates of given streams, provide a basis for estimating average yearly depletion. This rate, when divided into the useful capacity of the reservoir, indicates the length of its expected life. The usual evaluation procedure is to discount the future value of the losses over the period of years involved. Thus the longer it takes to silt up the reservoir, the less will be the present value of the loss. Similarly, the less will be the benefits from a sediment reduction program.
The major difference between current flood water and reservoir damage evaluation practice is that the latter employs compound interest calculations. Sedimentation rates, however, are as much the product of unpredictable rainfall as are flood flows. A period of frequent, heavy-sediment-producing storms may cause serious capacity depletion or increased operating costs long before the estimated time; a series of dry years following such depletion may reduce the volume of water in storage below the "safe yield." It is now known for instance that previously estimated sediment rates are too conservative. One reason for this is that watershed deterioration has become more serious and widespread than formerly. In addition, population growth plus increased per caput water use are already taxing reservoir supplies well beyond the allowances made at the time of construction.
It is true that storage reservoirs when silted up lose all or most of their economic value, whereas flood plain areas subject to recurrent water damages usually retain their values for crop production or other purposes. On the other hand, once a reservoir is used up, other sources of water supply must be developed - usually at greater cost and often of less effective service - if the dependent economy is to survive. Thus the fact that a reservoir has lost its usefulness by no means justifies the assumption that the dependent values are completely amortized and therefore need no further attention.
Existing and authorized reservoir sites, especially tile larger ones, represent in most instances the best and cheapest of all possible alternatives. Their replacement, where physically possible, can be undertaken only at greater cost in labor and materials as well as in dollars. Also, the supply of major reservoir sites is definitely limited; the existing ones plus those included in projects now authorized will utilize the major portion of the total known reservoir sites in the United States.8 For these reasons they should be classed as irreplaceable resources along with soil and other national wealth and considered accordingly in public resources evaluation practice. Reservoir sedimentation losses should therefore be determined in essentially the same manner as are floodwater losses namely, on a simple average annual basis.
8
Carl B. Brown, "Aspects of Protecting Storage Reservoirs by Soil Conservation," Soil and Water Conservation 1, 1 (1946).
What index should be applied to sedimentation rates in determining tile long-run public losses from depleted storage capacity? Should it be the actual construction cost? Should it be the cost of providing alternate sources of supply, if available? Or should it be the value of the economic activities made possible by the reservoir?
If it is accepted that reservoir sites, like soil, are irreplaceable resources, the use of either current or replacement cost would provide an inadequate, as well as an inconsistent, measure of the damages. Granting that from a private financial viewpoint it may be profitable for some time to come to replace used-up sites, the feet still remains that they are definitely limited in number and are steadily becoming more precious. Regardless of private financial criteria, public security plainly requires that reservoir sites be made to last as long as possible.
The public welfare may require land-restoration measures too costly for the private owner.
These considerations strongly suggest that damage determinations be based upon the long-time average annual gross income of the dependent economic activities. As income based on past and current conditions alone would be an inadequate measure, allowance would be made for the effects of future population growth and of higher per caput consumption up to the limit of the reservoir's capacity to produce services. The damage per unit of lost storage would be obtained by dividing the total capacity of the reservoir into the total amount of dependent income.
The above procedure would apply to all reservoirs irrespective of their size or length of life. It is believed that such an approach more nearly recognizes the accelerating national interest in conservation than any of the traditional methods now. in vogue.
The case of Lake Mead on the Colorado River may be cited to illustrate the contrast between the two basically different methods for determining how much to spend to lengthen the life of a reservoir. This impoundment of 32,359,000 acre-feet (39,900 million m3) was created in 1936 by construction of the Bureau of Reclamation's giant Hoover Dam at a first cost of $165,000,000. A major purpose is to supply irrigation water for 500,000 acres (200,000 ha.) of arid but fertile land in Arizona and California as the basis of an economy expected to support at least 125,000 people and to help meet the world's pressing food and fiber requirements. Additional purposes are to furnish drinking and industrial water for southern California, an area of some 4 million people, to provide flood protection for the Colorado River Valley and to generate much needed additional hydroelectric power for the highly developed Pacific Coast regions.
Authoritative engineering estimates indicate that at current siltation rates the useful capacity of the reservoir will begin to diminish by 1985, or within 37 years and that by 2079 or only 131 years hence, the reservoir will have completely lost its usefulness except for the generation of run-of-the-river power. Present annual depletion in capacity is 137,000 acre-feet (169 million m3)). The storage thus lost each year would be enough to irrigate some 35,000 acres (14,000 ha.)
According to one economic evaluation, along the usual orthodox lines previously discussed, the loss from the complete silting up of Lake Mead would total $470,000,000. This would consist of declines in farm land values, on-site values of dependent urban and industrial areas, unamortized investments, losses in value of firm power storage works, increased flood damages, population relocation costs, and operating income losses.
These losses, however, would occur over a period of years. Orthodox evaluation procedure requires that they be discounted to arrive at their present worth. For this purpose a three-percent compound interest rate (the present rate on long-term government borrowing) is applied. By this discount process the capital value of the loss shrinks to only $51,000,000 or around one-ninth of the future value. The conclusion reached is that the public interest would not be served by expending a total greater than this amount to prevent Lake Mead from becoming useless. The author admits, however, that if a lower discount rate were used or if silt rates should be greater than currently estimated the present worth of the loss, consequently the justifiable expenditure to reduce it, would be higher.9
9
John B. Bennett. Economic Aspects of Siltation of Lake Mead, Memorandum, U. S. Department of Interior, 28 January 1947 (mimeo).
The above evaluation is arrived at by applying private economic criteria to a resource of immense social importance. As such, it rests upon the faulty premises already discussed.
By applying the public evaluation criteria suggested earlier in this paper, even in the inadequate medium of monetary values, we obtain a far different picture of the threat to Lake Mead and a far different conclusion as to the expenditure justified in forestalling this impending disaster.
The money loss from the public viewpoint may be determined very conservatively by considering the gross annual income of the reservoir-dependent economy. Assuming a gross income of only $500 per caput per year for the 125,000 people in the irrigated area alone, the annual loss over an indefinite time period would amount to over $62,000,000. This sum might be viewed as an upper limit to the annual public expenditure justified in the interest of avoiding or delaying destruction of Lake Mead. Undoubtedly, double this sum could be justified if all of the additional direct and indirect money values alone, especially those accruing to rapidly growing southern California, were properly evaluated.
No comprehensive physical surveys have vet been made to indicate precisely the capital expenditure and annual maintenance costs required to achieve a material reduction in sediment inflow from the 167,800 square miles (43.46 million ha.) in the drainage basin above Hoover Dam. However, the cost of an adequate watershed program can roughly be approximated by reference to a recent U. S. Department of Agriculture estimate for the Missouri Basin. This area of some 531,000 square miles (137.5 million ha.), or over three times the size of the Colorado above Hoover Dam, exhibits somewhat similar conditions and problems Mean annual flow of the Missouri is some 0.14 cubic feet per second per square mile' (0.0015 m3 per second per km2), and its annual silt production, 375 short tons per square mile (131 metric tons per km2), as compared with a corresponding flow at the mouth of the Colorado of 0.09 cubic feet per second (0.0025 m3 per second). and a corresponding silt. production of 800 short tons per square mile (280 metric tons per km2). Seventy-five percent of the Colorado's silt load, however, comes from an area of only 65,000 square miles ((16.8 million ha.), contributing only 10 percent of the total flow of the river.
The Department of Agriculture's estimate of the capital expenditure required to achieve and maintain satisfactory soil and water conservation on the Missouri River watershed amounts to $1,321,000,000, or about $2,500 per square mile ($960 per km2). Allowing $3,000 per square mile ($1.200 per km2) to meet the probably more critical problems in the Colorado above Hoover Dam gives a capital or first cost of around $500,000,000. Annual maintenance costs might run some 3 percent of this, or $15,000,000. This outlay would provide for a thoroughly integrated, multipurpose watershed remedial program consisting of such measures as soil and vegetal cover restoration or stabilization, stream bank and channel stabilization control of gully or arroyo cutting, silt detention structures, water spreading and conserving facilities, and the land operation improvements and continuing conservation practices necessary to assure proper and permanent management of the forest, brush, and grassland areas.
Annual cost of such a program calculated without interest over a 100-year period would amount to $20,000,000, of which $5,000,000 would represent the annual value of the initial installation cost. This compares with the $62,500,000 annual income estimate for the irrigation economy dependent on Lake Mead. Assuming the necessary funds were made available, a program of the above type could be installed within 25 years, or 5 to 10 years longer than the period generally estimated for similar Department of Agriculture watershed projects.
The occurrence of normally rapid geologic erosion in some parts of the Colorado Basin makes it impracticable to attempt to stop all sediments at their sources. Nevertheless, it is conservatively believed that a thoroughly integrated, comprehensive watershed program would reduce siltation of Lake Mead by at least 50 percent. Even so, the above expenditure would be fully justified in that both the remaining useful and total life of the reservoir would be doubled and the productivity and earning power of the dependent economies extended accordingly.
Natural Storage Capacity
The same line of reasoning applies to losses of natural storage capacity caused by erosion or other forms of damage to the soil. The water-holding capacity of the soil mantle, especially the upper layers, far exceeds the capacity that could be artificially created by the largest conceivable program of reservoir construction. Hence the maintenance of natural storage is of tile utmost national importance.
Forests as Water Supply Sources
In addition to their functions in the reduction of flood and sediment damage, forest lands are also important water supply sources. The problem of determining the worth of a forested watershed for such purposes does not usually arise so long as it produces desirable streamflow. Commercially speaking, the watershed area may be said to have a "stumpage" value determined by the difference between the average selling price of the finished water and its production cost. Some attempts have been made to evaluate the water supply services of forested drainages on that basis. This approach however, is entirely inadequate from the water user's viewpoint. It provides no sound criterion for judging how much could justifiably be expended to assure the proper functioning of the watershed.
A more realistic approach would be to consider the damages - poor distribution of seasonal flow, lower quality water, higher treatment costs, reduced dry season hydroelectric power output, cost of necessary works to provide substitute storage for water and sediment, etc. - that might be expected if watershed conditions were not adequately maintained. (The same approach could also be used to determine what uses in addition to water production could be safely permitted.) As in the case of reservoir sedimentation, community dependence indicates that probable damages should be estimated on the basis of all dependent values at stake, and without benefit of compound interest. The justifiable outlays so determined would probably exceed the actual expenditures necessary to assure the stability of the watershed, especially if it were already in good condition; but this method would provide a far better index of the public's estimate of water supply values than the narrow "stumpage" approach.
Benefits Evaluation
When the forest resource is performing its multiple services at full efficiency, the flow of benefits is immediate and continuous. Cost-benefits comparisons can be made directly, especially if costs are primarily of a uniform annual nature; but where the forest resource has been impaired, the benefits from its rehabilitation will be delayed according to the degree of impairment. Where deterioration has progressed so far as to upset the soil-cover-water relations of the area, its restoration may require relatively large capital outlays.
The application of private finance procedures to such situations inevitably leads to the conclusion that it does not pay to invest in the required watershed improvement measures. The initial capital and early maintenance costs are too heavy; benefits are long in coming and shrink alarmingly when reduced to present worth. In addition, most of the benefits may be of a character which will produce no visible returns to a private owner. For these reasons the major responsibility for restoring badly eroded and otherwise decimated areas has largely fallen upon the Government.
The fact that society as a whole is expected to undertake such "profitless" activities further militates against the use of compound interest in determining the expected public benefits. Yet calculations employing the methods and rates of private finance have resulted in recommendations against watershed remedial programs because they were "uneconomic."
"To rule the mountain is to rule the valley."
Besides suffering from the weaknesses previously mentioned, benefits calculations of this sort rest on several unsound premises: first, that if the work is deferred, no increased damages will occur in the future; second, that it will cost society - in terms of labor and materials - no more to do the work in the future; third, that the need for resources will be no greater than it is today.
Dr. Lowdermilk has this to say on the subject: " Today we are prone to measure the fate of land solely in economic terms of present market prices. If it aces not pay under present economic give and take, we look upon destruction of land with complacency. This complacency grows out of a false assumption that there is an abundance of land; that if we destroy this farm, we can go west to take up new land. But in the long history of mankind, economics is like the weather - it changes back and forth. It changes far more rapidly than climate changes. But the changes in land that are brought on by soil erosion are not like economic changes. They are cumulative in their destruction and in the effects of eroded materials Such changes are not reversible. It matters little what the economics were that brought on soil depletion and destruction if the land is destroyed for further growing of crops. The fact is that when soil is gone it is costly beyond reason to restore the remaining material to a state of production. Commercial economics may actually set in motion processes that cannot be reversed - may impoverish the land. Herein is an insidious hazard to our land. For under profitable business economics the land of a nation may be despoiled.
" In our stewardship of land, therefore, we must look beyond commerce of today to the economics that determine the future of our people. If economics will justify nothing else than the destruction of land which is the heritage of our people, something is wrong with the economies rather than with the land."10
10
Walter C. Lowdermilk, "A Hope for the Future," Soil Conservation 13, 2 (1947).
Judging by the fact that our land and water resources are being damaged more rapidly than they are being reclaimed, it is inconceivable that foresters or other conservationists should accept the principles or methods of commercial finance as a basis for public resource evaluation. Simple methods based on knowledge of the physical and social factors involved would be-more in keeping with the objectives of conservation.11
11
Restoration costs and benefits might be summed up for a given period of years - 100 years as a minimum from the public point of view - and the totals compared directly. Or, if average annual values were desired. the respective totals would be divided by the period of years involved.
The evaluation of forest land for recreational use or for fish and wildlife production is another problem of growing importance. Efforts are currently being made to measure these values either to indicate limits of justifiable public expenditure or to appraise the damages from land and water abuse or harmful engineering developments.
Thus far, such evaluations have been confined to given units or localities. No realistic attempt has yet been made to take the national aspects into account. That these resources are of large social and economic significance is thoroughly established. Yet the fact that this significance derives from the part played by each locality in maintaining a desirable national balance among all types of areas has been completely overlooked.
Only from a national viewpoint can we best judge how far to go in safeguarding the recreational qualities of a given area. Otherwise it will be difficult, if not impossible, to express the full extent of the public interest. This approach seems particularly called for where conflicts arise with local projects, such as dams, whose direct money benefits outweigh the local returns from recreational use, fisheries, or wildlife. The proper appraisal of such resources would call first of all for a determination of the national need for them. This would take into account increased population growth and expected increases in per caput use over, say, a 100-year period in the future, and also the extent to which the existing areas or facilities are sufficient in amount, quality, and location to meet both present and future demands. Finally, specific provisions would be made to fill in whatever gaps were revealed. Such an over-all consideration would aid materially in arriving at sound conclusions as to the importance of retaining recreational areas in given localities.
The need for a unified approach in resolving conflicts of this kind may be illustrated by the effects of proposed irrigation projects upon cold water fish such as trout. When weighed on a purely local basis, the scale is tipped heavily in favor of developments which will impair or destroy the habitat. The money returns from irrigated lands are usually greater than those which could be derived from maintaining trout environment. Yet from a national point of view the fact that suitable trout streams are becoming scarcer despite a growing demand for them, and that large expenditures are being incurred for this type of fishing, would indicate that other factors besides local returns should be weighed. As most of the finest remaining recreational, fish, and wildlife areas are in public ownership or under public control, it would seem the better part of wisdom that costs-benefits appraisals of engineering developments recognize all conservation interests. Otherwise there is grave danger that our finest recreational areas and our finest fisheries will be whittled down bit by bit in one section of the country after another. Clearly the national interest requires a still closer co-ordination between land and water conservation agencies than is yet in evidence in these fields.
Sound evaluation practice requires that the procedures applied fit the purposes intended and square with the underlying physical facts. Private finance methods fail in both respects so far as resource conservation is concerned. While such methods may suit the purposes of the private owner, they fail to consider the general public welfare. When applied to public resource evaluation, they require the setting up of artificial and unrealistic distinctions. They omit or give wholly inadequate weight to values not readily susceptible to commercial appraisal. Their complex calculations give a false semblance of accuracy to the results obtained.
Conservationists who are concerned with the broader values inherent in forest lands should no longer be content with the premises or calculations of private finance as a measure of the limits to conservation effort. Instead, they should develop their own principles and methods or at least insist that whatever methods are applied rest on sound biologic and social principles. Statistical procedures used with care and discrimination would be helpful, but the complex interrelations involved and the necessity for forecasting future events call for the use of informed and intelligent judgment in arriving at the final answers. In view of all circumstances, the straight-line average annual approach is recommended as a reasonable solution to the problem of evaluating natural resources and the effects of conservation activities in the public interest.
Illustrations for this article wore provided by courtesy of the U. S. Forest Service and the U. S. Bureau of Reclamation.
