Ok I thought of an example Kaus might use to illustrate that it isn’t just the market that determines wage levels, public policies and other such – and one that perhaps Austrian-inclined people would not really have any disagreement with. In the U.S. we implemented various tax policies that incentivize (or disincentivize) certain kinds of renumeration, and we’ve also implemented certain laws and regulations – such as 401K savings plans (which I think Kaus likes) and rules restricting “hostile takeovers” of corporations (which I think Kaus would think are bad policies on *prudential* grounds), which have the effect of insulating corporate management (CEOs &tc) from the discipline of the market, and give the employees (at least at upper levels) more control over the company than the shareholders, and thus they choose the boards of directors, the shareholders are often “absentee landowners,” and you have a situation where the firm is being run for the benefit of the employees.
Now, an Austrian would say “this is why intervention of any kind distorts the market, and we shouldn’t have such things at all.” But Kaus’s point would be “the way to fix this would be to change policy, not tax rates. Krugman is focusing on the wrong thing, and his policy prescription is thus bad.”
Like any “Atari Democrat”/”New Democrat,” Kaus never crossed the line into non-interventionism; he never even crossed the line into becoming a Republican. He’s just for “better public policy, one that understands incentives and incorporates them into social/public policy.” Kaus also shares with Krugman a concern with income inequality, he just thinks Krugman is wrong about the sorts of policies that would work to address it, and on how far to go.
Allowing for where he’s coming from, for someone with that perspective, Kaus is very good – indeed, as I said, IMO we can find a lot of good arguments in that article. But he’s coming at it from a non-Austrian/non-Libertarian perspective, so you’re not going to find yourself agreeing with everything he says.