When the courts award only on the basis of cordwood value, they are virtually awarding a liability (the cost of removal & cleanup - often exceeds cordwood value = negative value). The court has failed to see value of living tree(s). Since a living tree can provide value to real estate / than the HBU of the property establishes that a 'value' for living trees exists.

Since the tree is living and growing, than evaluation of a tree(s) existing value must taken into consideration future value & HBU value.

Steve

Reply to post by Stephen Wiley, on November 16, 1998 at 03:15:09:

1. The concern about cordwood limitation is even more elemental than any arguments (one way or the other) about living tree values. Limting a measure of damages to the salvage value of the damaged property is logically inconsistent (if not absurd). The more you damage a propert the lower the salvage value left behind. So if you leave nothing of worth there was no damage? In a recent case defenendant counsel argued that the cordwood value awarded should be for the green, uncut, unsplit, undelivered, unstacked logs lengths (little more than stumpage) rather than split seasoned usable wood. The plaintiff was left with piles of brush to clean up, the wood to process and move and the loss of living trees in a residential (not woodlot) setting. But damages = a few dollars for the unprocessed wood. Go figure!

2. Still looking for a definition of HBU.

3. Is this in response to the 'Future?' post?

Reply to post by Scott Cullen, on November 16, 1998 at 03:15:09:

Scott,

Yes, this can be considered a response to your ealier post on 'Future values'. However, several days progressed without a response. Since, I am desiring (as I am sure you are) further input on these definitions ('Value' & 'HBU'). I posted this topical response to generate further interest.

In the HBU thread I wrote: "Since we deal with a growing investment, future values are intricate factors in arriving at current values. Note: non-growth results in negative values."

I am still formulating my definition of HBU, and how it can best be used in appraisal.


Other uses of the abbreviation just for fun:

Entomoligical appraisal - Horny Bugs Under [tree, bark]

Utility appraisal - High Branch Untouched

Cordwood appraisal - Honorable Branch Utilization

Still thinking, Steve

Reply to post by Stephen Wiley, on November 16, 1998 at 07:25:57:

"Buyers and the market [read that as people who consider value] look forward, not back. Economists speak of the irrelevance of 'sunk costs.' Past or sunk costs are 'water over the dam' and affect current asset value only to the extent they influence future returns." (Klemperer, W. David 1996. Forest Resource Economics and Finance. NY. McGraw-Hill, 551pp.)

A lot of hints there about that simple, generic definition of value.

I'll fine tune my question about the future. We can estimate value as of any point in time: current (the most common case), sometime in the past, or sometime in the future, all described as the date of value. 'Future Value' is most often used to describe value at some point in the future. So the reworded question is: How do or should our opinions of value reflect considerations after the date of value?

Scott

Reply to post by Scott Cullen, on November 17, 1998 at 03:33:10:

Yes but.... If those costs are restricted to the dollars spent or invested and do not account for intangible costs like on or offsite damage and the associated costs to mitigate or eliminate these damages then again, the economist is only examining a part of the overall picture. This is exactly the reason why cost benefit analysis can be so flawed. It is a) difficult to attach a credible dollar value to some of the intangibles, b) many remain ignored orr unknown for many ears after they occur, and cumulative impacts tae a long time to be recognised (DDT being the classic example) and c) there is usually extreme political pressure to not get into these intangible impacts because they will derail the project flavour of the year. Humans are capable of infinita manipulation of "facts" to suit their own agendas, and regardless of the ASCA runic stones, we all hav eto make a subjective call at some point in most cases. Objectivityy in its strictest sense is an almost impossible goal when the data to be analysed require subjective human thought processes.

The point of all this being, the old adage that economist and accountants often know the cost of everything, but the value of nothing.

Cheers

Julian Dunster

Reply to post by Julian Dunster, on November 17, 1998 at 17:23:42:

Lots of truth in what you say Julian.

I don't think it negates the concept of value as the curent worth of future benefits. Assuming that we're talking about the social construct of monetary value, we look at an object or a system and estimate how it will perform or behave from here on out and put a 'value' on it. The exercise requires assumptions and the assumptions are indeed variable and subject to biases of all kinds, but we look forward to determine value today.
(Allowing that the past may give us indications of future performance).

Valuation is indeed an imperfect science. Because 'value' itself is a subjective entity, not a physical characteristic which can be directly measured and because we may not be able to divorce all of our own subjectivity from analysis of facts.

Another important distinction may be between value and damages, particularly with non-market goods. If we suggest that the value of a wetland (based on any ecological model that might apply) is the benefits it provides which = x, we might find that the cost to restore that wetland or mitigate physical damages to it (and off site entities) are > x, say y. So the total legal or economic damages are y + the present value of any portion of x that was lost during the period of restoration.

And another important distinction: Cost (whether replacement cost, historical cost expected cost, avoided cost) is not the same as value. Cost and value may in particular situations be equalities, cost and value are not identities.

One of the problems I see is the notion that appraisal may be misunderstood (by both practitioners and users) as a measurement exercise which is able to produce precise, absolute answers. Appraisal is not that. Appraisal is a guide to decision makers and should present facts to the extent they can be known so that decisions can be made within a range of possibilites.

Scott

Reply to post by Scott Cullen, on November 19, 1998 at 10:37:45:

Scott:

Knowing some of the difficulty you've confronted with the questions about value which you have raised, I'm gratified to see so many people responding, and that there seems to be genuine interest and a developing deeper understanding of theories of value.

Having said that, I don't really have anything to say or contribute to the thread at the moment. I'm really just still trying to post to this site (haven't been able to in the past due to ISP conflicts, or something)

Hope this flies.

Joe

Reply to post by Julian Dunster, on November 17, 1998 at 17:23:42:

Julian wrote: "This is exactly the reason why cost benefit analysis can be so flawed. It is a) difficult to attach a credible dollar value to some of the intangibles, b) many remain ignored orr unknown for many ears after they occur, and cumulative impacts tae a long time to be recognised (DDT being the classic example)..."

Costs are usually realizations based upon monetary expenses for replacement, and do not necessarily represent 'value'.

Scott, remember we discussed value experienced without an awareness of it. As Julian points out, how do we appraise the costs for intangibles. Oxygen production, pollution reduction, are certainly intangible yet beneficial and how are they measured in our future analysis? (Another factor not observed in courts only allowing 'cordwood value').

Julian further illustrates liabilities in future analysis with longterm impacts of herbicide damage. Other future liabilities could be: effects of severe whether, pollutants, disruption of/or changes to soil grade,etc.

Thus, the confirmation of the definition "Value is 'the present worth of future benefits'" is seen i.e. intangibles such as oxygen production, pollution reduction are and should be emphasized in the appraisal process. However, liabilities are unkowns and will require re-appraisal upon acknowledgement.

Sincerely, Steve

Reply to post by Stephen Wiley, on November 19, 1998 at 10:37:45:

Steve, I'll have to reflect a little on all that, but some thoughts come quickly to mind. As you and Julian and Kevin point out, we may have imperfect tools to quantify all future benfits, and when those tools tools provide indications of value through replacment cost or avoided cost we may have to wonder how accurate or complete they are. But in it's essence value is still the current worth of future benefits (to whom or whatever).

Value and damages may not be equal. If you appraise one damaged object and its value is its replacment cost and it can be replaced then maybe damages=value. If damaging one object causes ripple effects which damage other objects, damages include the reduction in value of the other objects (perhaps evidenced by their restoration costs). But damages may include more than the sum of restored values: incremental inconvenience or cost during the period between damage and restoration, pain & suffering, etc.

Maybe we can say that estimates of value look forwartd from the date of vale and estimates of damage look back to the date of damage and forward to the date(s) of full restoration and compensation.