36 Further, although tangible, or direct use value, such as timber and non-timber products,
can be estimated by market prices, it fails to reflect real value due to the existence of externalities. Hanemann 1994 reported that markets often fail to generate accurate
prices because of the non-excludable or non-rival nature of other costs and benefits. He suggests that the willingness to pay by individuals to avoid damages or accept benefits
are values that can be aggregated into a total price. Intangible values consist of indirect use value and non-use value resulting from
forest functions and include hydrology and water resource management, carbon sequestration, environmental contributions, habitat systems for wildlife, maintaining
biodiversity, etc. Theoretically, indirect values can be estimated by substitute products, replacement costs or preventive expenditures. Non-use values can be estimated by travel
cost value, hedonic value or contingent valuation methods McCracken and Abaza, 2000. As a result, in addition to timber extraction and land conversion to agriculture,
indigenous people’s traditional forest management contributed to economic value as well. Total economic value needs to include intrinsic, ecological, economic, cultural and
aesthetic values. Finally, total economic value contributions by indigenous people might actually be more competitive and sustainable in comparison to timber concessions and
agricultural plantations in the long run.
2.2 Valuing Forest Management
Forest resources have long been known to have intrinsic, ecological, economic, cultural and aesthetic values Furst et al, 2000. Sustainable forest management results in
efforts to maintain forest values and functions. Holland 2000 suggests that sustainability is a requirement to keep natural resources generated capital intact over time.
37 Market
transactions often provide an incomplete picture of true values. For
example, Meldeva 2000 reported that a current method of forest valuation in Russia is based solely on timber valuation. Furst et al. 2000 suggest that most cases of market
failure happen because of immediate economic benefit considerations such as demand for timber, demand for agricultural land, or the need to export forest products to generate
foreign exchange. Total economic valuation concepts are commonly used to reflect intangible good
values. In one example, Pearce et al. 1993 applied a number of techniques for estimating the total economic value of forest in Mexico. Turner and Jones 1991 break
down total value into direct use values, indirect use values and non-use values. Oglethorpe and Miliadou 2000 explain that direct use values are the benefits provided
by natural resources that are of direct use to people as the generation of marketable goods that can be traded. Examples of direct use values are timber products, non-timber
products, fishing, hunting, and tourism. Further, Oglethorpe and Miliadou 2000 state that indirect use values are functional services that natural resources provide and are
reflected in indirect benefits. Examples of indirect use values are carbon storage, flood prevention, and watershed protection Furst et al. 2000. Non-use values are non-market
intangible values, which people derive from preservation of environmental assets Stevens et al. 1995. McCracken and Abaza 2000 refer to non-use values as passive
use values characterized as intangible and per se are not observable from revealed preferences. They are quantifiable through direct pooling of use values and contingent
valuation.
38 Current methods used for natural resource valuation have a wide range of
applications and depend on the issues to be addressed, data availability, credibility and cost considerations McCracken and Abaza 2000. Generally, valuations are based on
cost and benefit analysis CBA. Additional methods used in economic valuation are market prices, replacement cost and preventive expenditure, proxysubstitute products,
opportunity cost, travel cost, hedonic pricing, and contingent valuation McCracken and Abaza 2000.
2.3 Research Setting
