De- and Reforestation: Stability, Instability and Limit Cycles

The optimal intertemporal use of forests is a traditional and extensively investigated topic with recent emphasis on sustainable uses. The political discussion about the clearing of tropical forests adds a topical, policy dimension to this investigation. This study shows that cyclical policies -- i.e., clearing is followed by reforestation and then again clearing and so on indefinitely -- may be optimal. This possibility, which is due to two things -- the growth of biomass, such as trees, and the costs of clearing and reforestation -- is overlooked in the corresponding literature. As a consequence, it is possible that present clearing practices, observable in many developing countries, may be an optimal, yet transient policy, that will be followed by reforestation as the developed countries with again expanding forests indicate.