Should Foresters Forecast?

Abstract:

Growth dynamics of forests are likely to be substantially altered by climate change. Optimally, forest owners should take these changes into account when making decisions today. However, the uncertainty surrounding climate change makes these shifts hard to predict and hence this paper asks whether forecasting them is necessary for protable management. While climate change uncertainty makes it theoretically impossible to calculate expected prot losses of not forecasting, we suggest a method utilizing Monte Carlo simulations by which to obtain a credible upper bound of these losses. We show that an owner following a rule of thumb, which completely ignores future changes and only observes changes as they come, will closely approximate optimal management. If changes are observed without too much delay, prot losses and errors in harvesting are negligible. This has implications for the eort foresters should devote to long run forecasting. It also implies the argument that boundedly rational agents may behave as if being fully rational has traction in forestry.