January 10, 1985
The Economic Way Of Thinking:
The More Houses Less Forest Dynamic
By Howard E. Hobbs, J.D., Ph.D.

             Every action has a cost. That is, every action involves some opportunity cost, whether or not this cost is explicitly stated or even understood by those incurring it. Since our world is one of limited resources, it is also a world of tradeoffs.
     Many citizens are attempting to have forest areas preserved as pure wilderness, arguing that we should preserve as much of our natural, as opposed to manmade ecology as possible. Preserving wilderness areas involves costs and benefits. The costs include less forest area for other purposes, such as camping grounds and logging.
     Who bears these costs? People who like to camp, but not backpack, in the first case, and people who buy houses and other wood products, in the second. Although the reader can easily understand the first case, the second may not be so obvious.
     Look at it this way. When fewer forest areas are used for logging, then the supply of lumber is smaller than it would be otherwise. With any given demand schedule, the price of lumber is therefore higher than otherwise. So houses are more expensive.
    Wilderness area preservation offers benefits to all those who like backpacking in the preserved area, and all those who can enjoy fishing and hunting there. Benefits are also bestowed upon those who do not themselves backpack, hunt, or fish, but would pay something to keep wilderness for their children.
     To determine what effect the saving of a natural ecology area has on the distribution of income broadly defined, we have therefore tried to discover, as always, who bears the costs and who obtains the benefits. This is usually an empirical question which can be answered only by examining relevant data.
     From limited studies that have been done, we can make a tentative conclusion about wilderness preservation. It has been found that backpackers are, in general, well educated and earn considerably more than the average. The gains from that activity go to middle and upper income groups.
     As for who bears the costs, we know that campers - those with tents, traders, ard campers, are, on average less well educated than backpackers and. earn considerably less. So, we are trading off recreation facilities used by lower income people in favor of those used by higher income people.
     As for the increased price of housing due to less lumber, we know that the poor will suffer more than the rich, because of wood product substitutes, for that matter. The supply schedule is farther to the left for non-wood houses.
    Since the price of wood houses is higher than otherwise, more people substitute non-wood houses and their price is bid up - their demand schedule shifts outward to the right. When fewer forest areas are used for logging, then the supply of lumber is smaller than it would be otherwise.
     With any given demand schedule, the price of lumber is therefore higher than otherwise. So houses are more expensive. Wilderness area preservation offers benefits to all those who like backpacking in the preserved area, and all those who can enjoy fishing and hunting there. Benefits are also bestowed upon those who do not themselves backpack, hunt, or fish, but would pay something to keep wilderness for their children.