The German struggle between the ‘Bodenreinertragslehre’ (land rent theory) and ‘Waldreinertragslehre’ (theory of the highest revenue) belongs to the past — but what is left?

Abstract

The beginning of the land rent theory is closely related to the German forest economists Friedrich Wilhelm Leopold Pfeil and Johann Christian Hundeshagen (1828). It was further developed by Gottlob König (1864), Johann Heinrich v. Thünen, Max Robert Preßler, Gustav Heyer, Max Endres and in particular by Martin Faustmann (1849). His 1849 published and well known formula may be seen as the center of the land rent theory. However, the application of this concept demanded a considerable change of forest management practice due to the reduction of usual rotations and stocking density. Eventually, the land rent theory conflicted with the principle of sustained yield which had become the central idea of forestry in Germany in the 19th century. Since forestry under German conditions did not start as an investment on bare forest land, but had to manage existing forests under the principle of sustainability, the theory of the highest revenue seemed to be a more appropriate guideline for forestry. However, the maximization of the highest revenue assumed a marginal interest rate of 0% because the time span between input and output was not considered. Besides that, this principle also conflicted with the reality of forestry, because the scarcity of financial funds was not regarded. So far, both theories have not delivered solutions useful to real forest economic decision problems in Germany. Using an example from Lower Saxony, it is demonstrated that considering the objective of sustainability leads to results which are in accordance with the reality and the economic theory.