As we turn our eyes from the undeserving rich to everyday Americans, I believe the death of this idea will awaken our empathy to the way millions of struggling families are being buffeted by forces beyond their control in ways that inspire fresh progressive efforts to bolster opportunity and security in a wealthy nation like the U.S.

Let's not just pin our hopes on the force of empathy. We now face a tremendous opportunity to address problems of gross inequality and economic waste and opportunity cost, as manifested for example in our absurd salary structures, on the score of economic rationality. For too long we have let conservatives portray themselves as the guys who best understood the cold but effective engineering of wealth and economic product, while liberals were content to see themselves as offering a a more compassionate alternative that accepted the conservative picture about strict economic efficiency and rationality, but worked in some kinder and gentler touches that softened the rough edges.

That is wrong. The conservative approach is not optimally productive and efficient, even leaving aside the humane concerns about the harshness of life in a free market system. A move to the left will not just be more compassionate. It can result in greater economic efficiency, more aggregate prosperity, and improvements in sustainability. There is a vast store of untapped economic potential that needs to be liberated from the conservative fetish for free markets, decentralized groping, and endless faith in invisible hands and emergent benefits. We have come nowhere near to meeting our potential, because we have neglected national strategic economic planning and organized public investment. These have a vital role to play. We need a better balance between organized social effort, on the one hand, and decentralized and unplanned individual initiative on the other.

Many people were formerly persuaded that whether or not people at the top "deserved" or "merited" their pay, nevertheless there were good utilitarian reasons from maintaining a system that allowed them to make and keep that level of compensation. It had been argued that these arrangements are economically efficient. The story was that the wages reflect the free market price for their services; and that those unregulated prices are the best means to manage the allocation of economic resources, including the resource of managerial talent. It was held that only with those extravagant incentives could we be assured of getting the right people in the right places to produce the benefits that flowed down to everyone.

This is now much harder for the average person to believe. And with good reason: because it is false. It seems fairly clear that the setting of wages at the higher end in our society is some kind of cooperative racket in which the wealthiest assist one another in siphoning wealth out of the system for unproductive and wasteful enjoyments at the margin. The money that is wasted on this parasitical behavior could be plowed back into investment in the firm, or used to compensate lower-paid employees who would derive higher marginal value for their consumption. It also seems more plausible to everyone now that these uber-earners at the top of the scale are grossly over-incentivized, and that we could get similar, or better, performance out of individuals who, while well-paid, would draw a significantly smaller salary. Finally, we can now see pretty clearly that the extravagant salaries actually generate perverse incentives for excessive risk-taking and Ponzi behavior, producing a class of flim-flam artists who create economic messes, but are clever enough to cash out and sell them to suckers, so that others pay the bill.

The means the wealthy use for extorting these resources are complex, but they include the threat of going elsewhere. Public policy needs to put an end this racket. Salaries in any firm should be legally maxed-out at a fixed multiple of the firm's lowest paid employee. This ties managers to the well-being of their firms, and makes sure that the only way they can raise their own salaries is by raising the salaries of everyone up and down the pay scale.

I would like to see the "party of the left" in this country recover its old left-liberal roots, which were a fusion product of socialism and liberalism, and throw off the excessive left-libertarianism that has dominated Democratic politics for three or four decades, and is based on the pursuits of personal gratification and self-expression and liberation. These are good things in themselves, but we need a better balance.

We are not just a gang of free agents, united only by our common desire to compete for what we want, or to free ourselves from obligations to other people. We can be an actual community or society bound together by mutual obligations, a compact for sharing the common wealth, and a democratic desire to preserve a self-governing society of political equals. I think there is a yearning among many to be part of such a society of fellows, and to escape from the individual sphere of isolation and struggle that dominates so many lives in this country.

I must start by admitting that I haven't read the book -- only material here at TPM Cafe.

But on taxes, one idea I have long advocated (which I would be VERY interested to know if it is explored in concrete detail in the book) is "socially beneficial" taxation. There is a long tradition of taxing 'bads' like alcohol and cigarettes -- so called 'sin taxes'. But the general idea here is to bring it to a whole different level.

Taxes on pollution and scarce resources are key. For example, if IN ADDITION TO and not instead of having legal limits on mercury emissions, whatever emissions there ARE were heavily taxed, it would encourage not just barely meeting the existing standards, but bringing levels down as much as possible wherever cost effective. The same could be said for toxic pesticides and other agrichemicals(in addition to banning or strictly limiting a la DDT those where the information is sufficient to move legislators and/or bureaucrats). But those where there is uncertainty, or issues like nitrogen runoff. Some have suggested a carbon tax, but in the mainstream the notion (which I suspect is wrong) that cap-and-trade is economically more efficient holds sway.

On resources, CA could both raise revenue and significantly decrease water usage by a significant tax on massive water use (over one-acre foot per year). At 40 million acre feet (much of which is in smaller units), a tax of a mere few hundred dollars PER ACRE FOOT on water would raise billions every year, and discourage the growing of crops like rice and cotton that need a lot of water. It would encourage conservation in other areas. A tax of 100% or even more on redwood wood that is cut would reduce demand, making it easier to enforce the selective cutting method and provide a revenue stream to buy up virgin acreage as well as restore (on top of penalty money) ruined land.

The list goes on, but this is something that could be a huge part of what I see as properly the next stage of industrialization -- state led though not necessarily corporate capitalism abolishing (being realistic) "eco-industrialization".

There are also taxes I have seen suggested like the STET (Securities Transaction Excise Tax) and taxing derivatives (and taxing corporations heavily for the amount of remuneration over say $500,000 for any employee (or subcontractor equivalent). Also a cause of action could be established for shareholders to sue a corporation for overcompensating its top brass.

Does it change the argument much to substitute "wrong" for "dead"? Granted that The tyranny of wrong ideas isn't as zippy a title, the trouble is that these ideas are not dead, but they were always wrong. There are truly dead ideas, no doubt--but because they are really and truly dead, nobody knows what they were. Lots of the past is dead in that way, as well. There are zombie ideas--hanging around, but not taken seriously except by persons on the fringe. The earth is flat would be a good example of a zombie idea. http://www.theflatearthsociety.org/ I think what might be a good work would be to first identify wrong ideas and then zombify them

The failure to explode a Dead Idea -- that Financial Markets Can Regulate Themselves -- got us into today's economic ditch . . . .

I suspect that this conventional wisdom will become another "Dead Idea" in the future.

We're in "today's economic ditch" -- however deep it is or isn't -- because consumers and especially, the 45-54 age group (the traditional "big spenders") are saving their money as they work to repair their balance sheets.

That a bunch of bankers and financiers may be doing poorly is a mildly interesting but ultimately irrelevant observation.