Economics science is not Physics – Hence Inequality and Exclusion. Hence the Crises.

In contrast to the physics science whose basic theories are natural, the science of economics is based on theories developed on the basis of human assumptions, many of which do not stand in today’s globalized economy and therefore serve the needs of the few against those  of many.

Also,  mathematical models which were developed on the basis of these assumptions fail to predict the effects of economic predictions.

Let me give an example. The basic theory of economics is that wage growth leads to an increase in unemployment! What is really happening today is that lower wages lead to lower consumption, resulting in companies being forced to lower their prices to maintain market shares. This also has as a result, a reduction in the value added  of the products and services offered. Therefore, more and more markets are filled with low value-added copies of copies. We innovate only to reduce added value and price

Of course, this greatly benefits multinational companies that have a cost and price advantage. But over time it creates a vicious circle that leads to reduced profits and potential losses. This result,  leads to the most frequent economic crises aimed at the reallocation  of wealth, the drastic correction of previous mistakes and the great inequality and exclusion of people. No one is anymore paid based on the value they produce. High-level executives are paid far more than the value they produce, while workers are usually paid much less than the value they produce.

It should not be like this! If you overturn this fundamentally flawed hypothesis and change the model so that wage growth is based on production and value, then the conditions will be created for the production of higher value products and services that all consumers who are better paid can buy. Additionally, this will lead to real innovation since businesses will be forced to design products and services of greater added value. And then we truly create a growth model of prosperity for everyone.

Similar distortions are observed in other theories of economic science that need to be revised.

And this can be done, because unlike physics theories that are natural, economic theories are made by humans.

Yiannakis Mouzouris
Strategy and Performance Management
Expert / Business Consultant / Trainer
B.Sc. Mechanical Engineering
M.Sc.Engineering Management, USA