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living, broadly defined, of most citizens, and it doesn’t tell us whether the growth we experience is sustainable.
    T HE E CONOMIC R EFORM A GENDA
    A real economic reform agenda would simultaneously increase economic efficiency, fairness, and opportunity. Most Americans would gain; the only losers might be some of the 1 percent—those whose income, for instance, depends on rent seeking and those who are excessively linked to them. The reforms follow closely from our diagnosis: we have a problem at the top, the middle, and the bottom. Simple solutions won’t suffice. We identified multiple factors contributing to the country’s current high level of inequality and low level of opportunity. While economists often argue about the relative importance of each of the factors, we explained why resolving the question is an almost impossible task. Besides, inequality of opportunity in America has grown to the point where we have to do everything we can. Some of the causes of inequality may be largely beyond our control, others we can affect only gradually, in the long run, but there are still others that we can address immediately. We need a comprehensive attack, some of the key elements of which I lay out below.
    C URBING THE E XCESSES AT THE T OP
    Chapter 2 showed how so much of the wealth at the top is derived, in one way or another, from rent seeking and rules of the game that are tilted to advantage those at the top. The distortions and perversions of our economic system are pervasive, but the following seven reforms would make a big difference.
    Reducing rent seeking and leveling the playing field
    Curbing the financial sector. Since so much of the increase in inequality is associated with the excesses of the financial sector, it is a natural place to begin a reform program. Dodd-Frank is a start, but only a start. Here are six further reforms that are urgent:
    (a) Curb excessive risk taking and the too-big-to-fail and too-interconnected-to-fail financial institutions; they’re a lethal combination that has led to the repeated bailouts that have marked the last thirty years. Restrictions on leverage and liquidity are key, for the banks somehow believe that they can create resources out of thin air by the magic of leverage. It can’t be done. What they create is risk and volatility. 2
    (b) Make banks more transparent, especially in their treatment of over-the-counter derivatives, which should be much more tightly restricted and should not be underwritten by government-insured financial institutions. Taxpayers should not be involved in backing up these risky products, no matter whether we think of them as insurance, gambling instruments, or, as Warren Buffett put it, financial weapons of mass destruction. 3
    (c) Make the banks and credit card companies more competitive and ensure that they act competitively. We have the technology to create an efficient electronics payment mechanism for the twenty-first century, but we have a banking system that is determined to maintain a credit and debit card system that not only exploits consumers but imposes large fees on merchants for every transaction.
    (d) Make it more difficult for banks to engage in predatory lending and abusive credit card practices, including by putting stricter limits on usury (excessively high interest rates).
    (e) Curb the bonuses that encourage excessive risk taking and shortsighted behavior.
    (f) Close down the offshore banking centers (and their onshore counterparts) that have been so successful both at circumventing regulations and at promoting tax evasion and avoidance. There is no good reason that so much finance goes on in the Cayman Islands; there is nothing about it or its climate that makes it so conducive to banking. It exists for one reason only: circumvention.
    Many of these reforms are interrelated: a more competitive banking system is less likely to engage in abusive practices, less likely to be successful in rent seeking. Curbing the financial