Despite considerable international attention in the field of forest conservation, tropical forests are still disappearing at an unaltered pace. This book gives an economic perspective on the analysis of deforestation. Following a survey of different deforestation definitions, theories and empirical evidence, a case study of Ecuador provides a versatile historical picture of factors affecting forest loss throughout different periods, regions and ecosystems. Policy and market failures alone cannot explain rapid deforestation. A root cause is that, with current technologies, market prices and disparate stakeholder interests, natural forest uses in Ecuador tend to yield less income than alternative (mainly agro-pastoral) land uses. The deforestation cycle follows a composite economic rationale, based on wood extraction, agriculture and cattle ranching. Though a slower pace of deforestation seems rational for the Ecuadorean state, on the basis of precautionary considerations, substantial success in curbing forest loss can only be achieved when payments for global forest benefits are combined with effective conservation incentives on the ground.