The Birth Of Esops;

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ESOPs are testimony to the power of ideas -- the ideas, in this case, of an iconoclastic economist named Louis O. Kelso. Coming of age in Depression-era Colorado, Kelso pondered the causes of the economic collapse around him. His conclusion: too few people owned capital. In a modern economy, Kelso figured, that's where real wealth originates.

Kelso kept his ideas to himself until 1958, when he published (with the philosopher Mortimer J. Adler) a book modestly titled The Capitalist Manifesto. It sold a lot of copies but left little impression on economists or policymakers. Never mind: a later book, Two-Factor Theory: The Economics of Reality, found its way to one E. Wayne Thevenot, executive assistant to Senator Russell Long, the powerful chairman of the Senate Finance Committee. Thevenot introduced the two men -- and Long, son of fabled populist Huey Long, liked what he heard. "If my pappy had had this idea," Kelso remembers Long telling him, "he would have made every man a king."

For the next 13 years Long wheedled and cajoled Congress into approving ESOP-related amendments to the tax code. Now, however, Senator Long is retired, and federal revenue needs are putting pressure on tax breaks of all sorts. Does that presage an end to the ESOP goodies? Probably not, say the experts. A few legislators, such as Representative Fortney H. "Pete" Stark (D-Calif.), like to attack ESOPs, but the vast majority is either sympathetic or neutral.

Kelso, now in his seventies, is gratified by the proliferation of his intellectual offspring, but bitter that economists still pay him so little mind. "I had the bad luck," he complains, "to displease the most arrogant profession on earth."