Mature trees in residential neighborhoods have private costs and both private and social benefits. The initial cost to purchase a seedling and plant it is relatively low, but the owner s opportunity cost of upkeep (time and money spent watering, raking leaves, trimming) can be large. The benefits from shade, improved air quality, and aesthetics go to the property owner and the neighbors. A forest economist estimates that a mature tree adds about $7,000 to the value of the owner s house, and also increases the value of neighboring houses (within 100 feet) by a total of $13,000.
Given the $13,000 external benefit, we anticipate that the equilibrium number of trees will be less than the socially efficient number. To address this problem, some cities subsidize the purchase of trees. For example, the city of Portland, Oregon, pays $50 for each new tree. In addition, some cities provide public services such as leaf pickup that reduce the cost of up keep