It seems to me that many people don't realise that economics is a social science, based on human behavior and reactions. The CEOs of companies who are laying off employees right and left certainly don't get it. Part of the reason we are in our current mess - besides greed - is short-sighted thinking by people who have been making decisions that affect the lives of so many others. If I were in a position to dictate how companies were run, I'd make these two changes:
Companies would be a lot smarter about cutting costs. In particular, rather than laying off a chunk of their employees, they should allow the employees to vote whether they would be willing to take a pay cut rather than potentially lose their jobs. I'll bet the vote would be for the pay cut. And the cuts would be higher for those employees in the higher ranks, since they can afford pay cuts more readily than those at the lowest echelons. That way, since folks wouldn't be so worried about losing their jobs, they wouldn't be so paranoid about making new purchases. They might buy less but the economy would dip slightly, rather than crash, and I suspect would rebound much more quickly.
A second rule I'd make is that CEOs can only make a certain number of times what the least-paid employee makes. No more of the CEO making $25,000,000 a year and folks on the manufacturing floor making $25,000. If the CEO wanted more money, he or she would have to raise everyone's pay, within certain parameters. Companies would not only save money (so they could sock it away for tough times), but this would also promote more solidarity and give folks the sense that they weren't just a cog in the wheel.
But of course, most folks at the higher echelons in companies didn't get there by being either pragmatic or altruistic, so I don't see either of these things happening, sorry to say...