Martin Faustmann
{{Short description|German forest economist (1822 - 1876)}}
{{Infobox scientist
| name =Martin Faustmann
| birth_date ={{Birth date|df=yes|1822|02|19}}
| birth_place = Babenhausen
| death_date = {{Death date and age|df=yes|1876|02|01|1822|02|19}}
}}
Martin Faustmann was a German forester who is regarded as the father of forest economics.{{cite journal |last1= Kurtilla
|first1= John V
|last2= Bowes
|first2= Michael D
|date= 1989
|title=Economics and public forestland management |url=https://digitalrepository.unm.edu/cgi/viewcontent.cgi?article=2662&context=nrj
|journal=Natural Resources Journal |volume= 29 |issue= 3 |pages=738
|doi= |access-date=12 March 2024}}
His 1849 analysis of the optimal rotation problem, often referred to as the Faustmann formula, remains in widespread use in natural resource valuation and policy analysis,{{cite journal
|last1= Brazee
|first1= Richard J
|date= 2001
|title=The Faustmann Formula: Fundamental to forest economics 150 years after publication
|url=https://www.proquest.com/docview/197721570
|journal=Forest Science
|volume= 47
|issue=4 |pages=441
|access-date=12 March 2024|id= {{ProQuest|197721570}}
|last1= McIntosh
|first1= Michael G
| last2 = Zhang
| first2 = Daowei
|date= 2024
|title=Faustmann formula and its use in forest asset valuation: a review and suggestion
|url=https://www.sciencedirect.com/science/article/pii/S138993412400011X
|journal=Forest Policy and Economics |volume= 160 |pages=103158
|doi= 10.1016/j.forpol.2024.103158 |s2cid= 267236224
|access-date=12 March 2024}} and continues to be a topic of active research.{{cite journal |last1= Knoke
|first1= Thomas
|date= 2019
|title=The optimal rotation for a fully regulated forest is the same as, or shorter than, the rotation for a single even-aged forest stand: comments on Helmedag's (2018) paper |url=https://link.springer.com/article/10.1007/s10342-019-01242-x
|journal=European Journal of Forest Research |volume= 139 |pages=133–143
|doi= 10.1007/s10342-019-01242-x |s2cid= 254193583
Biography
Faustmann studied Catholic theology at the University of Giessen for one semester in 1841 before turning to forestry.{{cite web
|url = https://www.forest-monitor.com/en/faustmann-symposium-china/
|title = The Faustmann Symposium was held this year in China
|author = Rafał Chudy
|date = 2016
|website = Forest Monitor
|access-date = 12 March 2024
|archive-date = 16 January 2021
|archive-url = https://web.archive.org/web/20210116154301/https://www.forest-monitor.com/en/faustmann-symposium-china/
|url-status = bot: unknown
}} He completed his examinations in 1848 and became the chief forester of Dudenhofen near Darmstadt, where he remained until his death.
Scientific contributions
A foundational problem in the economics of forest management concerns the optimal age at which a stand should be harvested (i.e. whether it would be better to harvest and sell younger trees today, or wait for them to grow and obtain a larger timber sale revenue later).
The key insight of Faustmann's formula is that because timber is a renewable resource, it is not possible to answer this question by accounting for standing timber alone. Although the impatient forester receives a smaller payment by harvesting younger trees, they also gain the opportunity to re-plant sooner. In other words, if a patient forester chooses to let their stand grow for an additional decade, they might receive a much larger timber sale revenue, but at the cost of delaying the next rotation: after harvesting, they are left with bare land, while their impatient colleague now has 10-year-old-trees.
Faustmann's formula allows forest managers to consistently solve for the optimal harvest age given information about the growth rate of the stand, expected timber prices, and a discount rate. The formula circumvents the problem of infinite regress because it can be simplified and solved as a geometric series.{{cite journal
|last1= Straka
|first1= Thomas J
|last2 = Bullard
|first2 = Steven H
|date= 1996
|title=Land expectation value calculation in timberland valuation
|url=https://www.timbertax.org/getstarted/appraisal/papers/pdf/ajoct96.PDF
|journal=The Appraisal Journal
|volume= 64
|issue=4 |pages=339–343
|access-date=13 March 2024
}} Because it accounts for the time value of money (or the opportunity cost of delaying a harvest), the financially optimal Faustmann rotation is generally shorter than the biologically optimal rotation age.