ABSTRACT
The Italian experience of forestry management provides an almost ideal case study of market failure, and at the same time, a good illustration of ineffective public policies. In Italy, forests cover nearly 30 per cent of the total land area, but forestry only contributes a negligible 0.1 per cent to the total annual value of market transactions. It is therefore fair to say that the market does not integrate Italian forests into the economy at all. A simple question, and a good starting point for a discussion of Italian forestry policy is: why not? A simple answer is that at current prices, forestry in Italy is generally unprofitable. Provided that we trust prices as valid economic indicators, we should be content that forest resources are not being wasted on unprofitable activities. But there are often many good reasons for not trusting price as the right indicator of the scarcity of a natural resource, either exhaustible or non-exhaustible (Dasgupta, 1982, Barde and Gerelli, 1977).
