The Use of Economics to Assess Stakeholder Incentives in Participatory Forest Management: A Review

The environmental impacts of tropical forest loss and its consequences on people dependent in some way upon those forest resources have been a significant rationale for development assistance to the sector in the past 20 years. In general, however, deforestation rates have not slowed significantly, and forest policies and programmes have not had their desired effect. In part, this is due to an inadequate understanding of the real costs and benefits, and how these
are shared between forest stakeholders, and in part because of a perceived lack of economic methods and experience in their application in project design and implementation. Although economics provides a powerful body of theory and evidence for explaining and predicting human behaviour, few studies have focussed on the incentives of the different stakeholders within the forest sector, or considered the impact of non-forest sectoral influences on stakeholder livelihoods and land use decision-making options. The main objective of this review is to explain and critically examine existing and emerging economic methodologies in terms of their potential and limitations to assess stakeholder incentives in participatory forest management (PFM). Five hypotheses are proposed to explain why more economic analysis has not been carried out. First, it is often felt that economic tools tend to be reductionist and so are not useful for understanding the complex reality of PFM; second, many of the tools are too complex to be accessible to potential users (in particular, the non-economist); third, they are not accessible because the methodologies are not clearly explained; fourth, economics is seen to have lost credibility among professional PFM practitioners, and fifth, as a result of perceptions linked to the earlier hypotheses, donors have tended not to provide resources for exploring local economic incentives.