<p>Should economists depart from the neoclassical assumption of independent preferences and admit that people do not only care about absolute consumption, but also about relative consumption? Three different motives for relative preferences are explored, an instrumental perspective most often grounded in signalling incentives, a view where people care about identity and self-image and finally a theory based on the information content in consumption. The central concern is positional goods, typically seen as status-goods, of particular relevance in signalling contexts. The consumption patterns arrived at give rise to wasteful competitive consumption; the desire to advertise wealth produce a pareto-inferior outcome with an overconsumption of positional goods. In relation to this, we briefly discuss some policy implications as well as survey the available empirical evidence.</p>

Should economists depart from the neoclassical assumption of independent preferences and admit that people do not only care about absolute consumption, but also about relative consumption? Three different motives for relative preferences are explored, an instrumental perspective most often grounded in signalling incentives, a view where people care about identity and self-image and finally a theory based on the information content in consumption. The central concern is positional goods, typically seen as status-goods, of particular relevance in signalling contexts. The consumption patterns arrived at give rise to wasteful competitive consumption; the desire to advertise wealth produce a pareto-inferior outcome with an overconsumption of positional goods. In relation to this, we briefly discuss some policy implications as well as survey the available empirical evidence.

The facts that relative consumption concerns may give rise both to positional and environmental externalities, and that these two externalities are increasingly transboundary require us to derive an optimal commodity tax in an international framework. The corrective tax policy decided at a national level is found to fail to internalize all positional and environmental externalities. The optimal tax policy under an international cooperative framework reflects correction for both global positional and environmental externalities. In this broader framework, we also characterize the provision of pollution abatement as an additional policy instrument. The results show that relative concerns for one of the private goods do not lead to any modification of the policy rule for public abatement.

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