The bulk of the literature on the New Public Management (NPM) has been blind to the moral dimension of the market-oriented reforms of the public sector. However, this thesis studies the potential for institutional arrangements such as financial incentives and other market mechanisms to undermine intrinsic, moral motivation among both“producers” and “consumers” of tax-financed welfare services. The first paper demonstrates how the promotion of NPM-like ideas by various left-wing and right-wing agents after 1968 led to the erosion of a professional ethos among Swedish teachers. The second paper shows how an ill-conceived school voucher reform in Sweden, implemented under the banner of NPM, has encouraged moral hazard on the part of schools. The thesis demonstrates an ecumenism between the left and right that with few exceptions has been overlooked in political science. It also demonstrates that public administration systems that have adopted market-oriented reforms need morality in order to function in accordance with the principles underlying these institutions.