DEVELOPMENT

Figure 4.2.1
Assessment of the components of total wealth
Intangible
capital
Protected areas,
alternative
cost method
Forest resources, NPV
Land assets, NPV
Agricultural land, NPV
Wealth
measured
using
the NPV
method
Natural
capital
Residual value of
structures and
equipment
Value of urban
land assessed
indirectly
Residual value of
structures and
equipment
Produced
capital
Produced
capital
Step 1 Step 2 Step 3 Step 4 Step 5
Structures and equipment Urban land Natural capital Total wealth Intangible capital
Source: Where is the Wealth of Nations? Measuring Capital for the 21st Century, 22
The value of sub-soil assets is assessed during the period
of use, based upon the net present value of the net profit
earned during the (future) period of use. 5
In the case of forest resources, the value is the
present value of the resource rent for timber. In order to
do the calculations, data is required about timber production,
the unit price of products made from timber, and
the period of use of the forest. The product value is relatively
simple to calculate, using the average or prevalent
global market prices. The assessment of the resource rents
is more difficult. Theoretically, the present value of the
forest should be equal to the net value of the forest owner’s
future stump fees, from which the costs of growing
the forest, throughout the maturation period, have been
deducted. Generally, the exact figures reflecting the revenues
and costs of forest owners are not available in many
states, and therefore, various average prices for timber
products, as well as the calculated regional resource rents
(price – cost/price) were used in the study. 6
In the case of agriculture land, assumptions were
made concerning the average revenue from resource rent
for ten cultures; the invariability of the agriculture land;
as well as the average growth of 0.97% of agricultural production,
per year, in the developed states, and a growth
of 1.94% in the developing states. If the calculation year
is t (based on the last assessment for 2005), the projected
revenues for the period are t+24. 7
In the case of protected areas, the best theoretical
point of departure is the willingness of the consumers to
pay for the existence of protected areas. The evaluation
method based on the willingness to pay is implemented
in the case of natural sites that do not directly produce
revenues, but which are valuable for many other reasons.
These sites may be unusual natural phenomena, like the
Jägala Cascade, or red sandstone outcropping on the Ahja
River in Taevaskoda. Since these natural wonders do not
have a price, the following method is used to determine
their value — people are asked how much they would be
willing to pay to preserve these natural wonders. In this
case, the survey depends on the sample of respondents.
The same principles are applied to summarise the result
as are used for determining the support for various political
parties. Since the evaluation of natural wonders in
this way is related primarily to individual examples, in
order to apply this way of thinking more generally, and
ensure comparability on an international scale, an evaluation
method utilising quasi-alternative costs was used,
which was based on the average productivity of crop land
5 t+T–1
The value Vt is calculated with the following formula: in which p i is a unit of rent income; q i the production volume; r
V t = ∑ p i q i / (1 + r)i–t
i=t
the social discount rate and T the life span of the resource (depletion time). Although generally, assessments exist for
the various sub-soil resources and possible depletion periods, actually, the assessment of the reserves and possible future production volumes
are uncertain. In the calculations, the value T=20 is used for all sub-soil assets, or in other words, it is assumed that the sub-soil assets will be
depleted in 20 years.
6 To calculate the present value of forests, a timing value factor of 4%, and a time horizon of 25 years, is used. If the harvest exceeded the
natural growth, the quotient of the difference between the forest reserve and the natural growth was used for the temporal assessment of the
depletion of the forest reserves. If, based on this calculation, the depletion period for the forest reserves turned out to be less than 25 years,
the appropriate shorter time period was used to calculate the value of the forest. When dealing with production reserves, the existence of
infrastructure is also considered, which would ensure the accessibility of the timber, and the timber that is located more tan 50 km from the
corresponding infrastructure is assessed as production reserves. Taking this fact into consideration means that only the forest which can be
harvested and transported at a reasonable cost, due to the existence of the infrastructure, is taken into account.
7 4% was used as the timed factor (The Changing Wealth of Nations, 2011, 149). In the case of pasture land, the general assumptions were the
same; the global prices for beef and lamb, as well as milk and wool, were used to calculate the rent value; and the growth tempo was assessed
at 0.89% annually, in the developed states, and 2.95% in the developing states (The Changing Wealth of Nations, 2011, 149).
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Estonian Human Development Report 2012/2013