In 1978, declaring that no man is bigger than the Democratic Party, Joseph Lefante gave up his Hudson County, N.J., congressional seat.

It was an astounding example of latter-day machine politics. The Democratic boss, Jersey City Mayor Thomas F. X. Smith, had told him to resign and, U.S. congressman or not, Lefante chose not to resist.

For Hudson County, one of the last bastions of political boss rule in the nation, Lefante's act was in a fine tradition. A decade ago a county official said he would jump off a roof if the county boss at the time, John V. Kenny, asked him to. The mayor of Jersey City, forced to resign when it became known that he was not an American citizen, announced that he was "proud to be a puppet of John V. Kenny."

Outsiders have always joked about New Jersey. Woody Allen once remarked that "a certain intelligence governs our universe -- except for parts of New Jersey." When a mobster disappeared, someone was always certain to suggest that he had been buried in New Jersey.

That outsiders' view, New Jersey residents argue, is only partly correct today. A series of trials that sent politicians to prison in the 1970s proved that there was large-scale corruption in the state. But the trials also proved that New Jersey was cleaning itself up.

Now the FBI has imkplicated a U.S. senator and congressman from New Jersey and a number of other politicians and lawyers in its Abscam "sting' operation, sending new shock waves through the state. For outsiders, it may seem to be the same old story of corrupt, boss-dominated politics. But dozens of interviews in the state suggest that any signs of Abscam corruption and at least as much from a new threat, the high amounts of money brought into the state by casino gambling in Atlantic City.

New Jersey's political system has a history of nurturing corruption. For most of this century, powerful bosses controlled candidates for office and business was done on a "what's in it for me" basis of favor trading.

Men like Camden Mayor Angelo Erichetti, who has been implicated in Abscam, seem to spring from this tradition. But, in the view of poeple here, people like Sen. Harrison A. Williams Jr. and Rep. Frank Thompson Jr., do not. While bosses may have often picked candidates for Congress, they are said to have done it the way a president picks ambassadors -- to reward campaign contributors or friends -- but not to find people who would be cut in on deals at home.

Into the 1960s, four men -- the Democratic county bosses of Hudson, Essex and Middlesex in northern Jersey and the Republican leader of Atlantic County in the south -- controlled the state.

They could pick the governor, and the governor in New Jersey can pick everybody else. He is perhaps the strongest governor in the nation. He appoints all the other state officers, including the attorney general, and all of the county prosecutors and judges.He controls the executive and the judiciary. Traditionally, the county bosses controlled him and the legislature.

To make control even easier, most counties were ruled by one party or the other. Close contests between Democrats and Republicans were rare. The bosses sometimes would openly support the other party's man. It was not uncommon for one party to intentionally -- and obviously -- run a weak candidate.

Kenny was sent a knife dipped in catsup by one Democrat he had abandoned. His power was awesome. In 1953, Robert Meyner won the Democratic nomination for governor although he lost every one of the 21 counties except Kenny's Hudson. Kenny could deliver the vote.

But Hudson County, where Kenny was known at the time to have kept $700,000 in cash in his house, was always a bit special, and today it is the last vestige of old New Jersey politics. Acts like Lefante's resignation are perhaps the last of their kind.

The power of the bosses has been greatly weakened or destroyed elsewhere in the state. Some examples:

A 28-year-old insurgent, Peter Shapiro, is the Essex County executive after defeating the Democratic Party machine.

David Wilentz, who once ran Middlesex County, publicly attacked Joseph de Marino, but de Marino was elected mayor of Woodbridge Township anyway.

The Republican Party tried but could not prevent newcomer Jeffrey Bell from beating Sen. Clifford Case in the 1978 Senate primary. In Atlantic County, Bell was barred from appearing at Republican forums, and he met with cold receptions elsewhere.

Gov. Bredan Byrne, Mayor Smith and other Democratic leaders could not stop basketball hero Bill Bradley in the 1978 Democratic Senate primary. Byrne and Smith supported Richard Leone, the former state treasurer, but Bradley was so strong that Smith backed away from a confrontation with him over ballot placement. The only county Leone carried in the primary was Smith's Hudson.

Byrne is the key figure in the state's transition, along with the prosecutors whose investigations sent many of the old-line county leaders to jail.

Corruption gave Byrne one of his first big boosts toward the governorship. In a series of wiretaps on mobster Angelo (Gyp) de Carlo, mobsters referred to Byrne as a man who couldn't be bought. That phrase became Byrne's campaign slogan.

One of the most powerful seats in Trenton, the capital, had always been the state treasurer. Byrne and his treasurer, Leone, changed the way that office worked.

Leone put the state's bank deposits out for bid, gave the power to select government contractors to a selection board, created a nonpolitical investment policy and infuriated influence peddlers and politicians by closing his door to them.

Whenever he got a request to see someone about a business deal, Leone said last week, he answered with a letter saying: "I'm sure everything you say about Mr. Blank is true, but . . ." He would enclose a booklet entitled, "How to do Business With New Jersey."

"They got even when I ran for office," Leone said. "I couldn't raise any money."

Another sign of the transition is that candidates now raise money without the help of the party organization. Senate and congressional candiates no longer are selected by the county organizations.Most still do not seem to have much power or interest in political dealing back home.

Bradley is becoming an exception. His enormous popularity and his hard work are making him powerful in the state.

One reason old-style party politics survived longer in New Jersey than elsewhere is the state's lack of any commercial television stations. For years, candidates did not use television commercials because it was thought too expensive to buy New York or Philadelphia stations' air time at a high price to get an audience that would include many non-New Jersey voters.

It is still expensive, but now candidates are doing it. Bell, who upset Case in 1978, said that one of the reasons he decided to enter politics in New Jersey was that it had been slow to adopt campaign techniques of direct mail, TV and radio, and that he could use them to advantage.

But reforms are far from complete:

Although Peter Shapiro won control of Essex County, he was beaten by the old guard when he tried for the leadership of the county's Democratic Party.

Six years after Byrne took office, Earl Josephson, who was named head of the treasury's division of purchase and property, a former key post for the dispensing of patronage, is still only "acting director." The governor knows he cannot win Senate confirmation for Josephson.

Collusion between Democrats and Republicans is still said to exist openly in Passaic County.

The Hudson County leaders continued to wield extraordinary power in the state legislature.

Altantic City is the key to New Jersey's future, many people think. The question is whether the state can control the casinos or whether the casinos will end up running the state.

"Casinos change the whole game," said one man who has watched them closely. "The numbers of dollars are so huge that everyone loses track of what the realities are. The temptations are enormous."

"It's knocking all these guys out," Leone said. "People have lost all sense of proportion. Imagine what it's going to be like when there are 15 casinos."

Casinos put so much pressure on the political system that pessimists wonder if the system can survive. For decades, the politicans were selling access.Now, with the casinos seeking political favor, the purchase of access has one again come center stage.

One of the anachronistic elements of Abscam, several New Jersey politicians remarked, was that Sen. Williams allowed his wife to be an officer of a company seeking a casino license. That smacks of old-style New Jersey, and indicates to some how out of touch with changes in the state Williams had become.