Write short notes on the following determination on return from Recreation facility, Returns from new technology, and Returns from other Non-Market Forestry Products.

1. Recreation facility

There are four methods by which return from recreational facilities can be calculated. 

These include:

            a.         Cost approach

                In this approach return form the recreational facilities or the value of recreation is considered equal to cost of providing recreational facilities. In this approach we only consider supply and demand is not considered at all.

            b.        Opportunity cost method

            In the opportunity cost method, the recreational value is considered to net reduction in timber and grazing value. Suppose in area if we deduce timber and grazing and return form the timber and grazing was 15000/- . So the return or value of recreation facility from that particular site will be 15000 rupees. This approach does not reflect the true value of facilities.

            c.         Gross expenditure method

                Value of recreation is the aggregate of expenditure incurred by visit. These include:

o   Traveling cost

o   Lodging and boarding cost

o   Cost of eatable commodity

o   Other costs

–                  In this method lodging and boarding does not reflect true picture. It may overestimate recreational value facility.

d.        Zoning method

  2.     Returns from new technology

–    Following are the points that should be kept in mind for determination of return from new technology:

o   Major factor is economic growth with the introduction of new technology.

o   In USA 57% growth attributed to technological growth. It is because of the improved technique of production. New technology shifts production or production function upward which means same output can be produced with little or less input or with same input larger output can be produced.

Suppose using the old technology we produce 20 units output and our input is 10 units. While using the new technology, we can produce more from the same input which is known as Economic growth. As shown.

Find out Net Discounted Return (NDR) before improving technology:

                                                               NDR   =  DR   –    DC

            (Where; Dr is discounted return and DC is discounted cost)

Similarly, find out net discount return (NDR) from old technology e.g. from old technology DC is 1000 and DR is 4000; whereas, from new technology DC is 1200 and DR is 6200. New for old technology, the NDR is 3000 whereas for new technology the NDR is 5000. Now we can deduct the return of old technology from new technology

                                    Ie NDR (new)  –  NDR (old)

–          Thus, the returns from new technology is calculated as:

                                    RNT   =  5000  –  3000  = 2000

–                  So we can get 2000/-  more if we use new technology.

3. Returns from other Non-Market Forestry Products

–         The returns from non-market forestry products such as campgrounds, wildlife, wilderness, etc can be calculated by shadow pricing and by taking average of willingness to pay and willingness to buy. The shadow price is used to buy analysis for cost or benefit, when the market price is felt to be poor or absent for estimating economic value. 

Technically shadow price is derived from complex mathematical model e.g. linear programming model, etc.