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Abstract:
We try to build a macroeconomic index, that includes some non-market variables, to be compared to the traditional GDP. Over the last twenty years answers to the welfare accounting problem have been different. Economists have used dynamic optimization to rigorously derive an index that can be used to evaluate small projects and their contribution to well being. National Accountants are trying to extend the System of National Accounts (SNA) in the form of satellite accounts by increasing the system boundary. There is also a number of other studies which cannot be included in either of the previous categories and that we may call indices of welfare. They are not rigorously founded and start from common sense ideas of what should and what should not be considered as determinants of well being. This type of indices, however, has received wide attention thanks to their immediate comparability with GDP and to their characteristic of emphasizing the long run trend of "welfare" as compared to GDP. Our work falls in the third category. We start from the Index of Sustainable Economic Welfare (ISEW) built up by Cobb and Daly in 1989 and we reproduce it for Italy, though revisiting the methodology associated to the construction of some of the variables. The results show that up to the seventies the Italian GDP only slightly overestimates the growth of economic welfare, but since then it seems to have been misleading, at least as compared to our index. While GDP has continued to rise, economic welfare has been stagnating. The importance of the environmental variables included seems to be decreasing over time, going from 38% in 1980 to 31% in 1990. The cost of pollution (air, water and noise) has a greater weight in the sixties (about 13%) and falls to 8% in 1990. The ratio between GDP and environmental degradation has remained constant over the decades under consideration, thus contradicting the idea that the demand for environmental quality increases with income.

Abstract:
Since the end of the eighties the Becker and Murphy model of rational addiction has been the dominant approach to estimate addiction effects. A rational addictive consumer, a smoker for instance, is supposed to maximize over the life cycle a stable utility function and to be fully aware of the future consequences of her addiction and chooses to be an addicted because she evaluates the benefits of addiction to be greater than its full costs. It follows that public policy should not interfere with such fully rational behaviour. On the other hand, the additional public health care costs smokers impose on non smokers could be internalised using price mechanisms, as the long run price elasticity of demand is supposed to be significantly higher than the short run one. This work tries to assess, through a review of the literature, whether the idea of rational addiction is robust, with a focus on smoking behaviour.

Intertemporal Consumption, Rational Addiction, Tobacco

Abstract:
We simulate the welfare effects of the Carbon-Energy Tax introduced in Italy at the beginning of 1999 which asks for smooth increases, over a number of years, in the prices of most fossil fuels. The welfare effects have been calculated using True Cost of Living index numbers and their parameters have been obtained through estimation of a demand system, using households-data from 1985 to 1996. The welfare loss at the aggregate level turns out to be quite substantial and affects Italian households in a non-negligible way, but the distribution of welfare losses across different levels of total monthly expenditures does not allow sustaining the regressivity of Carbon taxation, as the effect becomes bigger as we move up the income distribution. This evidence might encourage the use of Carbon Taxes as cost-effective instruments of environmental policy, especially after the recent negotiations on Climate Change. However, other important implications of Carbon taxation such as those on competitiveness and the environmental impact are not assessed in this study.

Carbon taxes, demand analysis, welfare changes