Here is an answer to a non-question. No economist who has escaped the clutches of Milton Friedman thinking would say or has said that stimulus and tax-cuts are a long-term solution. The interviewer and the headline writer are obviously no match for the interviewee. The interviewee quickly debunks the premise of the headline by stating the obvious.

I think the interviewee has a good understanding of our economic problems and even manages to get some information out despite the distracting questions from the interviewer.

I apologize for the fund-raising that precedes the actual interview. You can read the transcript at Real News while muting the fund-raising appeal.

Russia’s Oligarchs on Trial is the heading that the U.K. Guardian gave to three letters to the editor. The first letter to the editor pretty much spells out my initial reactions to the story of the conviction of Mikhail Khodorkovsky.

The ownership of large tracts of the Russian state by the oligarchs is a poisonous legacy of Yeltsin, … In an ideal world, the oligarchs, who achieved their fabulous personal wealth through their grossly immoral carpetbagging during the chaos of the breakup of the USSR, should all be dispossessed and slung in jail.

The last letter put it in terms of an analogy comparing criticism of the “selective prosecutions”:

is like saying that because a supermarket cannot prosecute all shoplifters, it should not prosecute any.

As I said, this mirrors my own initial reaction.  I don’t know the details of the case against Khodorovsky nor the details of his acquisition of wealth.  However, I would have to find out that his acquisition of wealth was due to the great economic value he added to Russia and the facts of the case against him were not true before I would change my attitude.  I know our politicians and our media would rather that we believe Khodorkovsky is being picked on because of his political dissent, but I am not buying it without the requisite proof that what they say is borne out by facts..

In the article The Era of Instability: Where We Went Wrong, Paul Krugman discusses a little bit of economic theory.

Witnessing the failure of economic policy over the past three years has led me to suspect that the kind of moderate economic policy regime that Mr. DeLong and I support – one that largely takes a hands-off approach to the markets, but where the government is always standing by to rein in excesses and fight slumps – is inherently unstable.

It can last for a generation or two, but not much longer. And I am not only referring to financial instability – intellectual and political instability are equally crucial.

In discussing Paul Samuelson’s contributions to economic theory of combining traditional microeconomics with Keynesian macroeconomics, he concludes:

It’s a deeply reasonable approach – but it’s also intellectually unstable, because it requires some strategic inconsistency in how you think about the economy. On the micro scale, you must assume that individuals are rational and markets will rapidly clear (that markets will adjust so that supply is equal to demand); on the macro scale, you must assume that there will be market frictions and individuals will sometimes behave irrationally.

Economists were bound to push at the dividing line between micro and macro -which in practice has meant trying to make macro more like micro, basing more and more of the theory on optimization and market-clearing. And it was probably inevitable that a substantial number of economists would simply ignore the realities of the business cycle that didn’t fit their models.

Fortunately we have the relatively new field of behavioral economics that might be making micro more like macro.  Behavioral economists study the way people actually behave economically rather than the way the theory says they should behave.  We find that even at the micro level there is some behavior that is far from rational and optimal.

If only the politicians and business people could catch up to the behavioral economists before our economy is sent to ruin, we might all survive the current Great Recession.