USDA Grant Supports Economics Research on Forest Valuation

Dede Long, assistant professor of economics at Harvey Mudd College, is a co-principal investigator (PI) on a $799,343 grant that has been funded by the U.S. Department of Agriculture. The grant will support groundbreaking research aimed at developing a new set of economic measuring systems that capture the full value of forest ecosystems, particularly focusing on the valuation of forest natural capital stocks excluded from national accounts.

The project is led by PI David Kling, an economist at Oregon State University. Co-PIs include landscape ecologists from Oregon State University and an economist and a fire ecologist from the U.S. Forest Service. Harvey Mudd student research assistants will work with the researchers to model how climate change and fire risks impact forest landscapes and forest-dependent biodiversity.

The research team will develop a more effective model of Forest Natural Capital Accounting Price (FNCAP), which assigns economic value to forests by integrating both market benefits, such as timber, and non-market benefits, such as biodiversity conservation. Accurately valuing these benefits is essential for capturing the importance of forests in economic planning and policy development, especially in the context of climate change and sustainable management.

The idea for this research was sparked by the Biden Administration’s recent initiative to incorporate natural resources into economic planning, including the creation of a “forest account.” Current research has primarily focused on valuing forest-generated commodity and service flows, while methods for pricing forest natural capital stocks in a manner that is compatible with principles of the system of national accounts remain comparatively underdeveloped.

Long and the team will create a generalized FNCAP model that overcomes these limitations and develops one of the first comprehensive measures for forest natural capital valuation. The model will integrate market and non-market values provided by forests, with a particular emphasis on biodiversity conservation. It will also account for fire risks in forest management, a factor often inconsistently addressed in existing valuation models.

“I’m especially excited to work with an interdisciplinary team and involve Mudd students in complex economic research with meaningful policy implications,” Long says. “One of my key responsibilities is developing a large-scale survey targeting California, Washington and Oregon to measure the social value of biodiversity dependent on forests. Designing this type of survey is a significant task, as it’s crucial to make the environmental goods we’re evaluating relevant and salient to participants. I’ll be collaborating with a professional illustrator to explore creative ways to convey biodiversity and forest composition through illustrations, which is something I’m personally excited about.”

The FNCAP model will be estimated using comprehensive economic and ecological data from forest land on the West Coast. By improving the valuation of forests, this research could help inform future forest management policies and support economic decision-making and sustainable practices, paving the way for a greener future. 

According to Long, the team’s goal is to develop a flexible, generalizable approach to valuing forest natural capital, one that can inform future policies and provide a foundation for future studies. Additionally, the project can provide Harvey Mudd students with opportunities to engage in valuable hands-on economic research with real-world impact and policy significance.