Is America kidding itself when it calls itself the land of opportunity?
Yes, it is. There are amazing stories of people who made it from the bottom to the top. But what happens on average? What is the chance of somebody from the bottom making it to the middle or somebody from the top who doesn't work going down? In terms of basic statistics, the U.S. has become less a land of opportunity than other advanced industrial countries.
Is your book The Price of Inequality, then, a warning about class warfare?
I don't like to use that term class warfare. The word warfare suggests it's a zero sum, with the top getting more at the expense of the bottom. The problem is that by denying opportunities to people at the bottom, we are actually hurting our whole economy, because that means they're not living up to their potential.
You worked for the Clinton Administration. With income inequality, are you not playing into the electoral cycle?
No. Maybe. The issue of inequality has been growing persistently in recent decades, but the way we responded to the crisis, with the bottom going down and the top seemingly protected, inevitably brought this issue to the fore. And it should be, because it's a basic question of the direction of our country.
As I understand your book, you believe in capitalism, but you don't believe in the free market?
The notion of the free market is a myth. All markets are shaped by laws and regulations, and unfortunately our laws and regulations are shaped in order to create more inequality and less opportunity.
Do you take credit for coining the expression "the 1%"?
Yeah, maybe. You can't patent an idea like that, although some people probably would.
Why do you think no bankers have been prosecuted over the current financial crisis?
In the years before the crisis, laws were passed that made it possible for people to do within the law a lot of bad things. Many of the abusive practices with credit cards, predatory lending, were clearly immoral. They went beyond the point of decency, but they didn't go beyond what was legal.
Are you saying people in the financial sector have no conscience?
They justify it by a set of defenses--"We made loans available to poor people"--that is absolutely unpersuasive in my mind.
How do we fix it?
I think Glass-Steagall, modified for the 21st century. We need more transparency. We need more consumer protection. A lot of the turbulence in the financial market is because no one knew who held the Greek debt.
What do you predict will happen in Europe?
I think this is as much politics as it is economics. The euro framework as it was designed 10 years ago was fundamentally flawed. It was not designed to respond to a crisis. I'm not very optimistic, but it could be at some critical moment Germany looks at the road ahead and says, Look, our choice is between a breakup of Europe or doing more, and they will make that choice.
What do Nobel-winning economists do with their Nobel Prize money?