American Lumber Industry: Its Essential Research and Policy Implications

Professor Joseph Zaremba in his book, Economics of the American Lumber Industry, has characterized the relationships between research and development, and the lumber industry. The lumber industry approaches the classical concept of pure competition which contributes to its inability to undertake sufficient research, development, and promotion. The results have been low productivity increases compared to those for competing materials and a consequent decline in the lumber industries’ share of the gross national product.. Future well being of the industry depends on more research and development. Motivations over the spectrum of R and D from basic research to innovation may not be the same. Basic research is more likely to be economically motivated than is innovation. Consequently, the more monopolistic an industry becomes or the more multiproduct giants the industry contains the greater is the probability that basic research will be undertaken. Innovative research occurs for many reasons such as chance discoveries which are not necessarily related to economics. Examples of methods to improve R and D probabilities for the lumber industry are described. If the lumber industries’ production problems were more widely known, more innovative people might work on them. Within the industry, any changes that might reduce the benefits from research external to a given firm would tend to increase the basic research undertaken. Such changes could be the growth of multiforest product firms, an increase in the corporate form of ownership, or the development of more vertically integrated firms. Counter arguments are presented to the theory that decreasing competition, although permitting a better climate for R and D, might promote economic inefficiency. One of these arguments concerns the importance of an organization of industry that maximizes the rate of increase in productivity: greater productivity resulting from the increased P and D could offset losses due to inefficiency. Also, with some monopolization of industry, the distribution of consumer income may change so as to alter society’s preference patterns or the loss due to monopolistic pricing in the American economy might be insignificant.

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