Mixed forests reconsidered: A forest economics contribution on an ecological concept

To stimulate an economically oriented discussion on mixed forest management, this paper considers economic implications of mixed investments of pure stands of the Norway spruce (Picea abies (L.) Karst.) and the European beech (Fagus sylvatica L.) on a methodological basis. It is well known that the classical economic calculus leads to an overwhelming financial superiority of single species coniferous forest management in Central Europe, especially for growing monocultures of spruce. This explains why, since the early 19th century, the range of these forest types extends far beyond their natural limits. The change in the natural vegetation cover bore severe environmental problems as it was accompanied by a loss of biodiversity and a severe reduction in the resistance against storm, snow, ice, drought and insect damage of the forest stands. In contrast to this development as early as 1886, the Bavarian silviculturist Karl Gayer claimed that the forest condition must be able to deal with the uncertainty of future development. While pointing out that this condition could only be provided by "mixed forests" he, as a pioneer, formed an ecological concept for forest management. Unfortunately, forest managers have not broadly accepted his concept up to now. In order to support the ecological idea of "mixed forests", it seems crucial to demonstrate that mixed diverse forests also possess economic advantages. Through using the portfolio theory founded by Markowitz and Sharpe, this paper evaluates mixed forest management and compares it to single species forest management. Its focus is on mixtures of Norway spruce and European beech. The Monte Carlo simulation method was used to simulate expected financial returns and their dispersion under risk. Mixed forests reduce the profitability but also show diversification effects due to only weak positive or even slightly negative correlated timber markets and diversified time structure of the timber harvests. Risk-averse decision-makers should therefore establish ecologically desired mixed forests with beech proportions between 10% and 50%, even if the profitability for mixed forests decreases. They will however benefit largely due to a significant risk attenuation. Although, effects of small-scale mixtures in stands comprising of many species were not considered we are sure that the findings of this study will in part also apply to mixtures on the forest stand level. While analysing an ecological concept from an economic viewpoint, which is transferable to the general idea of natural diversity, we intend to arouse interest in the ecologically oriented reader to evoke intensified future cooperation.