I was an early member of the Post-Autistic movement, the first in Texas, I like to say. A history of it can be found here.

My first appearance in the review was a reply to Bob Solow, who had written a subtle non-defense of economic orthodoxy. That was in 2001.

A year later, I found myself pleading with the PAE crowd, "Can we please move on?" I think we know what the sins of the economists have been. Our task is to do something about it. Endless critique is an exercise in futility, and readers of The Predator State will discover that I don't do more of that than necessary. The early chapters deal, as harshly as possible, with the notion that the "market is freedom," with monetarism, with tax-cut economics, with budget-balancing and with the strange notion that there exists, or could exist, something called free trade.

After that, I move on.

The middle of the book tries to define the type of economy in which we actually live. This has been, for 75 years, dominated and defined by government, by institutions built in the New Deal and the Great Society and damaged but not dismantled since then. Social Security, Medicare and Medicaid, Fannie Mae and Freddie Mac, the public universities and government-sponsored research and the armed forces are not add-ons to the American economy. They are, to a very large degree, what our economy is. They are why our middle class exists.

(And, for that matter, why our elderly exist. One can make a very good case that the enormous increase in life expectancy since the 1930s is due to the existence of Social Security and Medicare. This is truly basic economics: pay people to live longer, and they take you up on it.)

Here's a challenge for progressives. Try not to overstate how much damage the years from 1980 to 2000 actually did. In point of fact, Reagan did not control Congress after 1982. People forget: in that mid-term election the Republicans lost 26 House seats and Tip O'Neill emerged as a power who could not be ignored. Why? Because the Democrats waged a relentless campaign against the Reagan recession and against tampering with Social Security. (I was there, as Executive Director of the Joint Economic Committee at the time.)

Up to 2000, we still lived in a society defined by the New Deal and Great Society. That is much less true today, because of the rise of the predator state. But predation against those institutions is only possible, because the institutions exist. Without Fannie and Freddie there would have been no secondary mortgage market for the sub-prime operators to screw up.

In this middle section, I try to take down one of the most serious shibboleths of our time: the idea that the United States is a radically unequal country even today - and that we owe our supposed economic dynamism to that tolerance for inequality. We're not. And we don't. What has happened is an enormous increase in capital asset valuations, affecting the taxable incomes of a tiny number of people. This is inequality, to be sure, but it's inequality that very few Americans actually see first-hand.

Fun facts: (1) if you take out just fifteen counties (most of them the obvious info-tech centers in California, Washington and elsewhere, plus Manhattan) the entire increase in between-county income inequality in the US in the late 1990s disappears. That's not all of the increase in inequality, but it's a lot of it. (2) You can explain almost all of the rise of income inequality in the US going back to the early 1970s by the fluctuations of the NASDAQ. (Corollary: there is really no need to measure income inequality anymore. Much cheaper, just to look it up in the morning paper.) (3) In the Bush period, the info-tech bubble deflated, and only one place in the country saw exceptional increases in relative income. Where was that? The counties immediately surrounding Washington DC. This was the Beltway Bubble. (Never in the history of the republic did a Republican administration do so much for the housing wealth of a nest of Democrats.)

Take out those incomes at the very top, and you don't find that we became more unequal as we moved toward full employment in the late 1990s. On the contrary: Working America became more egalitarian, as it became more efficient and more fully employed. Why? It's really very simple: as the economy heats up, people at the bottom of the pay scale work more hours, earn overtime, and so forth. Their incomes rise more rapidly than those of better-paid salaried workers, and inequality declines.

The underlying economic moral: equality is efficient. There is no trade-off between egalitarian wage structures and full employment (neither here nor in Europe, incidentally, where the tradeoff fallacy is policy gospel.)

Next topic: Corporate Governance. Because the inequality problem that we do have is concentrated in a tiny elite, one is tempted to ask, why should we care? The reason, in my view, is not one of morality or abstract fairness. It is, rather, the corrupting influence of excessive pay on corporate leadership in this country.

Here the story begins with the world of my father's 1967 book, The New Industrial State, which I was able to bring back into print, courtesy of Sean Wilentz and Princeton University Press, in 2007. That book told of an economy dominated by large, fairly stable organizations, themselves dominated by their "technostructure." Obviously we no longer live in that world. Why not?

I identify four factors: (1) the challenge from overseas, especially Japan, in the 1970s, which was in part handled by negotiated surrender in the Reagan years; (2) the Volcker-monetarist bust, which destroyed much of the manufacturing base, needlessly in my view; (3) the migration of technologists to their own firms, whose valuations on the NASDAQ quickly put them at the top of the income structure, and (4) the corrosive effect of excessive CEO pay on governance of the firm. Again, Veblen's concept of predation is relevant here. But so is William K. Black's important new concept of control fraud. What is control fraud? Fraud committed by those in control. Black was the note-taker and whistle-blower in the Keating Five matter and he knows as much about this as anyone on the planet.

The rise of the predator state emerges from the capture of government by predatory corporations and their agents. Think Enron. Think Phil Gramm. (Who I notice is back in the McCain inner circle after an exile of what, one week?) Enough said already on that topic.

Let me post this now, and come back for one more entry describing what, in my view, should be done. Stay tuned.