First of a series of articles on the Forest Service and the economics of the timber industry.

IN the fifth grade I started a conservation club for my school. To me, the U.S. Forest Service epitomized conservation and stewardship. Rangers maintained trails, practiced ecology, and found lost hikers while Smokey the Bear admonished us to put out our campfires and appreciate the outdoors.

But today we hear that behind the popular symbols is an agency that suffers predictable bureaucratic and political pathologies. We learn that the Forest Service, once a symbol of good government, actually fosters waste and environmental destruction.

The Forest Service was founded by Gifford Pinchot in 1905. He initially promised that after a "modest" investment by Congress, the forests would pay for themselves. That has never been true because Forest Service decisions have always been biased by political pressures and budgeting. The deceptions have multiplied to the point that a group of disgruntled employees have set up a watchdog group, the Association of Forest Service Employees for Environmental Ethics (AFSEEE). Its members critique and seek reform of Forest Service policies.

The thrust of their, criticism, and that of others, is this: 109 of 122 of the National Forests lose money on their timber sale programs. In doing so they sacrifice the environment and non-timber values of the land. Alaska's Tongass National Forest exemplifies these problems.

The Tongass is the largest National Forest, encompassing 16.9 million, acres. It is best known for its temperate old-growth rain forest. This ecosystem has a diverse understory of plants and brush, which provides habitat for bears, owls and wolves, as well as a variety of landmarks including Admiralty Island National Monument.

Through massive subsidies, the Tongass is a large supplier of pulp wood and saw timber. While stumpage in the Northwest sells for hundreds of dollars per thousand board feet, in the Tongass it brings under $10 per thousand. Yet the costs of simply administering the timber sales and building the roads is about $56 per thousand. Absent the subsidy, private companies could not harvest such timber. But with the Forest Service footing the bulk of the bill, they do.

In the 1950s the Forest Service signed two 50-year contracts to provide logs from the Tongass for two local mills. These contracts oblige the Forest Service to provide highly subsidized timber, up to 300 million board/feet per year, solely to keep the two mills in business. This is regardless of cost, market conditions or the ability of the Tongass to regenerate the timber. So far, over eight billion board feet of timber has been cut and sold for a loss.

Under the contracts, the mills are also able to request "emergency rate redeterminations" of contract prices if the market price of milled lumber is inadequate to ensure profitability. Thus, the mills are assured of a profit. The Tongass returned over $15 million dollars to the mills in 1991 as a refund for "overpayment" in previous years.

And, of course, as environmentalists point out, the Forest Service ignores many of logging's cost. Habitat destroyed. Streams and spawning beds silted up by runoff. Sublime forests clearcut. This harms both wildlife and local economies. Healing may take decades.

Recently, the Forest Service asked some of its biologists to report on such impacts in the Tongass. The biologists concluded that numerous species would be displaced unless logging were scaled back. But the biologists' supervisors saw a threat to budgets dependent upon timber harvests. They suppressed the report. This is the bureaucratic logic of the former Soviet Union - and the resultant problems are similar.

The well-intentioned people of AFSEEE have not been able to change the Forest Service. I have known many people, including some of my best students, who have gone on to work for the Forest Service. Yet little changes. Why do basically good people do bad things?

The answer is that with bad incentives, good intentions will not suffice. And the "Forest Soviet's" bureaucratic imperatives continually filter out threatening information. Norman Maclean, author of A River Runs Through It, describes these responses in his last book, Young Men and Fire, telling of Forest Service cover-ups and obfuscation in the deaths of 12 Smokejumpers in a 1949 forest fire.

This same process inhibits evolutionary responses to our increasing knowledge of forest ecology and America's changing tastes and values. To prevent such episodes, fundamental reform is required. Personnel changes are not enough. Newcomers will face the same political pressures and antiquated structures. The goals of ecological sensitivity and economic efficiency have yet to be achieved by government bureaucracy.

Without proper incentives, reform will fail. There is hope. It lies with alternatives based upon new ways to use property rights and market incentives. With them, we can harmonize economical timber production with environmental goals.