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Cool predictions on a summer day

Lester Thurow does not look like a witch doctor. He stretches back, hands behind his head, and fills one corner of the office -- a lanky man, smiling, with the keen face and golden curls of a child movie star grown up. Summer light falls on the book stacks, travel posters, and understuffed sofa. From the hall comes the low hum of a desperate salesman, and outside, the gang mowers sweep down MIT's lawns, trailing clippings and the smell of newly cut grass.

"Someone once joked that economists play the role of witch doctor. A witch doctor doesn't really understand what makes things tick, but he tells you you're sick because someone's putting a pin in a voodoo doll, and you feel better. Not because you don't have the pain, but because you think you understand it."

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He laughs, a delighted sort of chortle, at some inner vision of Milton Friedman dancing around a bonfire, wearing a tribal mask. It is a lazy day, the sort of warm afternoon that seems even warmer when remembered in November. Lester Thurow, professor of economics, author, amateur mountain climber, is stretched out and talking about America's problems.

To the layman, economics often appears mysterious, characterized by long-faced men making dire predictions. All economists agree things will get worse, it seems, but when it comes to saying why, there is much throat-clearing, followed by the pointing of fingers and the chanting of various ritual theories.

Thurow's predictions are as dire as anyone else's. But he grins when he makes them, and he says why: why things are bad, why they're going to get worse, and why they won't get any better until certain fundamental American attitudes change. He has a fresh face and a gift for presenting clear ideas, and his latest book, "The Zero-Sum Society," has drawn praise from both conservative and liberal economists.

John Kenneth Galbraith liked it, though he didn't agree with all the solutions. William Wohlman, in Business Week, liked it even more. Harvard's Martin Feldstein doest notm care for Thurow's ideas, but the Joint Economic Committee of Congress requested a private seminar on the book. And Edward Cowan lauded "Zero-Sum" in the good gray New York Times.

Thurow's basic message is that inflation, unemployment, and America's energy problems can be fixed. But nobody wants to pay for the repairs.

"Our economic problems are solvable," he writes in "Zero-Sum." "For most of our problems there are several solutions. But all these solutions have the characteristic that someone must suffer large economic losses. No one wants to volunteer for this role, and we have a political process that is incapable of forcing anyone to shoulder this burden. Everyone wants someone else to suffer the necessary economic losses, and as a consequence, none of the possible solutions can be adopted.

"A zero-sum game is any game where the losses exactly equal the winnings. All sporting events are zero-sum games. For every winner there is a loser, and winners can only exist if losers exist. . . .The problem with zero-sum games is that the essence of problem solving is loss allocation. But this is precisely what our political process is least capable of doing."

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The sun is pouring into his office, over the piles of reports only an economist could love. Swiveling in his chair, Thurow fleshes out his idea with a practical example. Take electric power plants, he says. In New England, people are sure that coal gasification or solar power are the only answers for the future's electrical needs. The last thing they want is a nuclear plant in their neighborhood. But if you live in Montana, you don't think coal gasification is a very good idea, because it would mean a strip mine or a gasification plant near you. And you need copper to make solar collectors, which means you have to have a big, dirty smelter somewhere.

"Nobody wants a nuke plant next to them, nobody wants a coal gasification plant next to them, nobody wants a copper smelter next to them. So you get this problem where everybody's vetoing everybody else."

It is, he adds, a tyranny of minorities. Individual congressmen tell their districts they proposed real solutions to inflation and unemployment, but these solutions were vetoed by someone else. Then they report a successful defense against similar legislation that would have cut their constituents' income. How , Thurow asks, can America come to grips with a sagging GNP when everybody is looking out for No. 1?

This simple formulation of the problem has made Lester Thurow a hot property, as far as economists go. When asked to comment on life as a rising academic star, he looks surprised and pleased, like a college quarterback looking over his first pro contract.

"Ask me in a year," he says. "But I will admit I'm getting a lot more lecture requests."

The life that led Thurow to a professorship at MIT's Sloan School of Management could have been plotted by People magazine. He was born in Montana (a region not famous for producing supply-side economists or experts in monetary policy), the son of an itinerant Methodist minister. He grew up moving from church to church every four years, residing in places like Anaconda and Glendive.

"There are a few towns in Montana I didn't live in," he says, sounding like an educated Butch Cassidy, "but not many."

His first brush with higher learning was at Williams College, where he received a BA degree in 1960. Touched by the ideals of the New Frontier, he went into economics, he says ruefully, "to save the world." He then attended England's Oxford University for two years, on a prestigious Rhodes scholarship, and finished out with a lightning two-year sprint to a doctorate at Harvard.

"I joke that I had an underprivileged education."

He served on the staff of President Johnson's Economic Advisory Council for a year, then moved back to Harvard to work as an assistant professor for four years. In 1968, he was named a full professor at the Massachusetts Institute of Technology.

Since then, Thurow has served a year on the New York Times editorial board and been named in a Time magazine survey as one of 200 rising young leaders in America.

He lives in suburban Lincoln, bakes bread, and climbs mountains when he can, though he hasn't been able to for several years. Pictures from a 1976 conquest of Mt. McKinley hang over his office desk. The cherubic face is ice-covered, but recognizably beaming.

Galbraith has a Swiss villa; Thurow climbs mountains. Some say economists are attracted by heights.Others claim it's the cold. In any case, the role of the economist in today's society is on the ascent. They may be witch doctors, but there is no doubt they are popular witch doctors.

"Economists are starting to play the role lawyers used to play," Thurow points outs. "In Carter's first Cabinet he had five PhDs in economics and only four law degrees.Traditionally, presidents' cabinets are all lawyers."

Ten years ago, according to Thurow, the brief flirtation of former President Gerald Ford with Ronald Reagan would have been choreographed by members of the bar. "but who was the chief negotiator?" he asks rhetorically, discounting Henry Kissinger. "Alan Greenspan, economic adviser to President Ford."

The political inclinations of Thurow himself are difficult to capsulize. In the past he has spoken up for traditional liberal canons: social welfare programs, government-guaranteed jobs, and wage subsidies. But in "Zero-Sum" he suggests many measures that would make a New Deal Democrat blanch.

Running the federal budget at a surplus is one. Encouraging corporate mergers to provide American business with more flexible capital is another. But perhaps the most startling proposal aimed at lighting a fire under the GNP is his bald statement that all corporate income taxes should be abolished.

"Based on our principles of taxation," he writes in "Zero-Sum," "the corporate income tax is both unfair and inefficient."

Instead, he says, shareholders should be taxed on the money their corporation earns for them each year. "If you own a corporate share, the corporation at the end of the year sends you the equivalent of a W2 form that says, 'We've earned $ 1,000 on your behalf this year. Add it on to your income tax and pay.'"

He considers American taxes a wheezy and leaking system, in great need of an overhaul.

"There are lots of ways in the United States," he says, "to make a lot of money, spend a lot of money, and never pay taxes." In getting rich quick, he claims, working hard and saving pennies are irrelevant. Wealth strikes unexpectedly, coming to those such as the founders of Wang Corporation and Digital Equipment Corporation, who take an idea, form a corporation, and go public. The stock market assigns as value to their personal shares, and they become millionaires in 24 hours.

"And you don't even have to sell your shares to consume them. Take a million dollars' worth to your friendly banker -- and if you've $1 million there's a very friendly banker somewhere -- and he'll loan you money against those shares. So you can spend your money and never pay taxes. You can even deduct the interest on your loan."

Thurow unclasps his hands and shrugs, a gesture that says soundlessly "only in America." He seems to take delight in the quirks of the free-enterprise system, which, he says, is quite enterpising but doesn't really want to be free.

"despite all the speeches we make about free enterprise, nobody is willing to let it work. It's fine to be a Milton Friedmanite and have a free-market economy if everybody is willing to let it be free. But when people get allocated losses by that free market they immediately want government to stop it."

He cites steel and autos as two industries that have waved the flag for capitalism with one hand and taken government subsidies with the other.

Of course, the human cost in unemployment would be staggering if a corporation such as Chrysler were allowed to fail. Instead of bailing out the company, Thurow says, the government could bail out the workers -- training them to switch from what he terms "sunset" industries to "sunrise" occupations.

Admittedly, solutions are not his strong point. "The Zero-Sum Society" is seven chapters of analysis and one chapter of suggestions, and he believes defining the problem is, in any case, the first step toward revitalizing the American economy.

At the moment, he depicts America's decisionmaking institutions as paralyzed, unable to decide whose income will be cut to fight inflation or pay for synthetic fuel development.

On a cheery summer day, with students snoring on the grass and lawn mowers buzzing like a squadron of flies, it seems a harsh judgment; but it is also difficult to believe winter will ever come.

"The answer people want to hear is that the problems I'm talking about don't exist. Even the reviewers who quasi-agreed with me wanted to evade the bottom line. Like the Business Week reviewer, who gave my book a generally favorable review, said, 'Of course, we know things are not really this bad.' He didn't say why.

"But I'm basically an optimist. I think we're in a phase where we're wildly swinging around, looking for magic solutions that won't be tough. We'll eventually find there are no quick solutions." He pauses and hunches forward. Over his head the photos of snow-covered Mt. McKinley shine in the sun, like ice cubes. "Then, hopefully, we'll start thinking about realistic ways to solve the problem."

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