CANADIAN FOREST TENURES AND THE SILVICULTURAL INVESTMENT BEHAVIOR OF RATIONAL FIRMS

Discrepancies between the theoretical and actual investment behavior o f firms in the Canadian forestry sector are described. It is demonstra ted that these inconsistencies are, in reality, illusionary. They resu lt from the failure of some analysts to account for the institutional framework within which private forest companies in Canada make decisio ns concerning the replacement and management of forest crops. When the constraints imposed on the private sector are considered, conduct of forestry firms does conform to ''economic rationality''. Thus, convent ional economic theory can be used to predict firms' behaviors. It is s uggested that Canadian forest policies encourage behavior in private f irms which may significantly reduce the value of public forest resourc es. Specifically, firms have no incentives to efficiently allocate sca rce capital resources to silvicultural activities.