DO HIGH DISCOUNT RATES DESTROY TROPICAL FORESTS

C. Price

Journal of Agricultural Economics, 1991, vol. 42, issue 1, 77-85

Abstract: The short‐term viewpoint implicit in high discount rates seems to favour immediate forest exploitation rather than conservation for perpetual benefits. However, the value of logging revenues increases with a lower discount rate, because of the greater weighting given to investible funds. Thus, in several theoretical models, net present value of logging increases as discount rate is lowered. In practice, however, long‐term costs of logging may also incur the weighting appropriate to investment funds; reinvestment of logging revenues may not actually take place; and lower discount rates may be appropriate for costs but not revenues. These circumstances favour conservation, the more so at lower discount rates.

Date: 1991
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