--- Doug Henwood <dhenwood at panix.com> wrote: > "A
Hotelling-Faustmann Explanation of the Structure
> of Christmas
> Tree Pricing"
>
> BY: TOM VUKINA
> North Carolina State University
> College of Agriculture & Life
> Sciences
> CHRISTIANA E. HILMER
> Brigham Young University
> Department of Economics
> DEAN LUECK
> Montana State University
The economists can perhaps be forgiven for producing this one; the "College of Agriculture and Life" guy can't. The "Hotelling-Flauschman plantation management model", or as it used to be called "the Hotelling plantation management model", presumably before Flauschman became editor of an important journal (I'm guessing here), is, surprisingly enough, the standard decision model of .... the plantation management industry. They teach this model to you in MBA school, as a way of determining the most profitable way to manage your plantation (or similar kind of production unit).
Hilmer and Lueck are, of course, academic economists of the kind who just believe themselves to be doing a pure academic exercise; the idea that economics has anything to do with the real world is alien to them. For this reason, they assume that when they find a set of data which appears to follow the Hotelling model, their assumption is that, quasi-mystically, the Invisible Hand has drawn the independent actors to, by evolutionary means, happen upon the optimal outcome. They never consider that what actually happened is that the man who owns the field went to the library, read Hotelling's article, and put it into practice. Because that looks too much like planning .....
Vukina has no such excuse; he could and should have got this information from any practitioner in the tree-planting business.
I'm reminded of Krugman's laceration of "evolutionary economics" or "bionomics" who pointed out that when people say that " a market is a complex ecostructure. Outside regulation should not interfere with this system, because no outside agent can do better than evolution", they're typically not thinking about agriculture.
dd
>
>
> We examine the relationship between a tree price
> and a tree age
> (height) using a Hotelling-Faustmann model of
> optimal plantation
> management, which accounts for the possibility of
> replanting and
> biological growth. The model's predictions are
> tested using the
> data on Christmas tree prices in North Carolina
> collected in
> December 1997. The estimates show that, in
> general, the rates of
> change in prices between adjacent age cohorts
> reflect a
> competitive equilibrium in the capital market thus
> supporting
> the Hotelling-Faustmann paradigm.
>
===== “It is necessarily part of the business of a banker to maintain appearances and to profess a conventional respectability which is more than human. Life-long practices of this kind make them the most romantic and the least realistic of men” -- JM Keynes
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