Starting from the experience of watching the role of the teacher turn into a bureaucrat, this work examines the factors dominating current education systems. It identies Human Capital Theory as a main inuence on policy and prioritization decisions in education. A central tension that results from this inuence is the fact that economic theory assumes consumer sovereignty, which dismisses many ideological and political aspects of education as paternalism. This inherent conict between economic theory and educational theory leads to an overemphasis on positional goods, goods that are limited by scarcity, over nonpositional goods, such as knowledge. Educating for positional goods is contrasted to the Spinozistic ideal of education for freedom and for increased conatus. It is then discussed how current assessment practices play a central role in cementing the current hegemony in education as governed by economic concerns. Assessment practices are found to both contribute to current trends in education as well as stabilizing the system overall making transformative change less likely. This is more specically illustrated by two particular assessment practices, namely standardized testing and assessment for learning. It concludes with a search for possible paths to meaningful change in education.

The first essay studies the Marginal Cost of Funds in the existence of tax evasion. We develop a general equilibrium model of tax evasion, including the expected utility of taxpayers and three different revenue-raising government policies. In this rich model environment, we analytically derive the marginal cost of funds (MCF) for the alternative policy instruments. We consider two main fiscal reforms: the revision in the nonlinear tax scheme and the changes in enforcement mechanism (the audit and penalty rates). First, we derive the MCF for the tax reform and find its key determinants. The derived MCF is greater than the previous ones since it includes a "risk-bearing cost" as well as tax distortion. The reform in enforcement mechanism generates MCFs in different forms. Two more MCFs with respect to audit and penalty rates are presented. Finally, we compare these three different MCFs in numerical example and provide some policy implications. The second essay explores optimal tax structure in the presence of status effect. When the consumption of certain goods affects one's social status, this externality creates two opposite effects in a society. Seeking higher status through “positional goods" gives individuals much incentive to supply labor but still allocates income for less “nonpositional goods" as well. In this case, differential taxes on positional goods work as corrective instruments to internalize the social cost stemming from status seeking. Furthermore, the differential taxes generate revenue that can be used to alleviate preexisting income tax distortion. Thus, the differential taxes on positional goods could give so called “double dividend." I develop a game-theoretic model in which each individual with a different labor productivity unknown to the others engages in a status-seeking game, and the government has a revenue requirement. Then I show that, under a condition in which utility is separable between positional goods and leisure, a revenue-neutral shift in the tax mix away from nonlinear income taxes towards positional-good taxes enhances welfare. Hence, the differential taxes on positional goods are necessary together with the nonlinear income taxes for an optimal tax structure. The third essay explores the impact of increasing capital mobility on regional growth and environment. I develop an endogenous growth model in which each local government competes against the others, to induce imperfectly mobile stock of capital into its region. Then I show that an increase in capital mobility generates “tax importing" due to which each locality experiences a higher growth rate and more degraded environment. That is, the increasing mobility dampens the capital tax and transfers the burden of pollution abatement to the locality. This finding supports the hypothesis of “race to the bottom" in environmental standards. Identifying a reduction in overall welfare of residents, I consider two alternative federal interventions in the model: uniform environmental standard and requirement of lump sum transfer or tax. Both of these federal instruments enhance the residents' welfare. / text