An early contribution of Martin Faustmann to natural resource economics

Martin Faustmann has been credited with discovery of the ‘Faustmann formula’, but in this paper we show that similar principles of capital valuation were expounded somewhat earlier. A recently discovered article, published in August 1849 under nom de plume F., is a landmark in the capital valuation of forests and other renewable natural resources, as it appears to contain the first comprehensive and explicit description of the valuation principles in accord with modern capital and investment theory. In contrast to Faustmann’s subsequent classical paper, this article also shows how the optimal cutting age of standing timber can be determined analytically and demonstrates how the valuation method adopted can be used to solve several other key questions concerning efficient forest management and land use. r 2006 Elsevier GmbH. All rights reserved.