This lecture continues the exploration into the quantitative analysis of renewable natural resource management. We review the mean-annual increment (MAI) maximizing "biological rotation" as a model for finding a non-zero threshold for cutting when year-to-year growth drops sufficiently low. We then pivot off of MAI maximization to the Wicksell Rotation, which uses the prevailing interest rate as a threshold for critical growth rates. We then grow the Wicksell Rotation into the Faustmann Rotation, which includes the site value as well. We conclude with adding in the effect of other benefits of the natural resource (such as the non-timber benefits provided by maintaining old-growth habitat). That provides the opportunity to discuss methods for internalizing costs of habitat loss, with a brief introduction to Pigouvian and Coasean perspectives on the subject.
Whiteboard notes for this lecture can be found at: https://www.dropbox.com/s/96kprx6wxfn7jyq/LectureD6-2020-11-12-Economics_of_Renewable_Natural_Resources-Part_3.pdf?dl=0
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