Relative worth of investment versus spending for the economy
I don't think that there's a specific  number or index that gives you what you're looking for. I think the closest thing to it would be the velocity of money, which is a measure of how often money changes hands.  Also, for what it's worth, I believe that this concept is controversial in some circles. I believe you're looking for some sort of formula that will determine how changes in savings, investing, and spending will affect economic growth.  If such a formula existed (and worked) then central planning would work since a couple of people could pull some levers to encourage more savings, or more investing, or more spending - depending on what was needed at that particular time.  Unfortunately, no magic formula exists and so no person has enough knowledge to determine what the proper amount of savings, investing, or spending should be at a given time. I found this resource particular helpful in describing the interactions between savings, consumption, and investing.
"They may have planned on spending more money, but they haven't actually done so (just as I may plan to buy a new TV, but up until I've bought it I can change my mind).  The ever increasing spending, and related debt, is just a symptom of our ""leaders"" failing to make choices and lead. If A is more important than B, then spend the money on A and forego B--don't buy both. And, if both are essential then raise the taxes to pay for them. All we've seen for the last 40 years is congress buying A, and B, and then throwing in C for good measure but never figuring out how to pay for them. They simply pass the debts on to future generations and that's what has to stop. If we need something now, we should pay for it now. We should not be signing away our children's futures expecting them to pay for things because we want them now." &gt;In the economic sense, investments really has nothing to do with capital or business investments then does it?   Congratulations, you just figured out why monetarists and Keynesians are wrong.  What actually matters is the quality of the investments that the money is making. An excess of currency won't create growth if the currency is invested in a derivative contract, since this is a zero-growth investment. A shortfall in currency won't always kill the economy, if rational investments are made (2nd half of the 19th century in the United States).  On the other hand, [infrastructure](https://www.fhwa.dot.gov/policy/otps/060320a/forum.cfm) generally offers a much higher return on invested capital than the private market. So you see China's economy growing quickly for several decades due to investing in the right class of assets.  This is the same thing the United States did to become an economic superpower:  https://www.quora.com/What-is-the-American-school-of-economics  https://en.wikipedia.org/wiki/American_School_(economics)  https://en.wikipedia.org/wiki/American_System_(economic_plan) i disagree. if a country has sovereign currency, then there is no squandering.  where does that money come from in the first place?  govt creates it, and spends it into the economy through deficit spending.  And govt gets a service or product in return from that spending. Govt deficit spending = private sector savings. Well technically debt is commonly measured as a % of GDP in order to give it a sense of scale. How else would you compare US debt vs Greek debt. You can also do it as a % of assets I guess, but that's much harder to measure "not trying to be insulting, but i would contend your response should be the one dissected in econ 101.  why? because yours is the theory du jour among business interests and economic commentators in the media. the fact is that this brand of ""free market"" capitalism rests on a series of impractical assumptions.  first is that investors are perfectly rationale allocators of capital.  from this, that excess capital is invested - at all, let alone in a productive fashion.  next, that taxation (presumably what is considered ""high"") has caused unproductive investing practices, when in fact the inverse is true - decreases in effective income tax rates (personal and corporate) combined with the reduction of passive taxes (like the estate tax) have resulted in the incentive for investors to sit on their capital and do nothing to return it to the system.   finally, and perhaps most egregiously, that investing profits back into expansion and worker compensation is misallocation of resources. the entire article serves to demonstrate that this line of thinking is a self defeating concept. giving precedence to the relatively elite investor class ensures that capital is allocated according to their whims, and often times that simply means into their bank accounts. this starves the system.  so i don't expect to change your mind, but i would like others to know that what you are saying is widely debunked, chicago school nonsense that gets a lot of air time from self serving interests across popular media.  a few hours of unbiased research will make this evident. it is somewhat ironic that the theory has limited standing academically, as it works only in an academic/theoretical setting." none of which give a good return if the underlying economy is shit. the underlying economy will be shit if there hasn't been sufficient investment in more productive endeavors. if the underlying economy hasn't been sufficiently capitalized, that will present juicy returns to investors.   it's a complete substance-less threat that if we fail to continue to coddle the rentiers, the economy will collapse because they'll do X with their money (X being something other than maximizing return) "Past work, while certainly an important component, is not a *necessary* component.  As otherwiseyep stated before, it is credibility that is important. A farmer can promise a million bushels, and yes, it certainly could be fantasy; but his ""fantastical"" promise nevertheless has value if the other parties involved believes his promise.   Actual production has little relevance when it comes to worth, at least until someone actually tries to collect on said promises. This would create problems in a small, closed world, where the breaking of a promise would have huge ramifications on the economy as a whole; but, in the real world, broken promises are countered by the their naturally occurring opposite: under-valued promises.   The upset of this balance is, in fact, the essence of every financial crisis/boom. The vastness of the world economy means that money can never be truly representative of actual production.   Regarding the complaints about the high cost of higher education; the complaints are that the price of a degree is not indicative of its true worth. The widespread availability of a college education is one of the main factors as to why people believe college educations are too expensive. If there was an actually perceived limited supply of seats at schools, as you suggest, then the general public would value the seats more, and maybe wouldn't complain about the costs as much." Yes - it's called the rate of inflation. The rate of return over the rate of inflation is called the real rate of return.   So if a currency experiences a 2% rate of inflation, and your investment makes a 3% rate of return, your real rate of return is only 1%. One problem is that inflation is always backwards-looking, while investment returns are always forward-looking. There are ways to calculate an expected rate of inflation from foreign exchange futures and other market instruments, though. That said, when comparing investments, typically all investments are in the same currency, so the effect of inflation is the same, and inflation makes  no difference in a comparative analysis.  When comparing investments in different currencies, then the rate of inflation may become important. Investopedia has this note where you'd want the contrapositive point: The interest rate, commonly bandied about by the media, has a wide and   varied impact upon the economy. When it is raised, the general effect   is a lessening of the amount of money in circulation, which works to   keep inflation low. It also makes borrowing money more expensive,   which affects how consumers and businesses spend their money; this   increases expenses for companies, lowering earnings somewhat for those   with debt to pay. Finally, it tends to make the stock market a   slightly less attractive place to investment. As for evidence, I'd question that anyone could really take out all the other possible economic influences to prove a direct co-relation between the Federal Funds rate and the stock market returns.  For example, of the dozens of indices that are stock related, which ones would you want that evidence: Total market, large-cap, small-cap, value stocks, growth stocks, industrials, tech, utilities, REITs, etc.  This is without considering other possible investment choices such as direct Real Estate holdings, compared to REITs that is, precious metals and collectibles that could also be used. More exactly, it would be beneficial if government spent on something that increases economic productivity.    The problem is, how can the government determine what is a good investment vs a bad investment?  Even restricted only to building infrastructure, how does it know which bridges are good and which are [bad](http://en.wikipedia.org/wiki/Gravina_Island_Bridge)?  Government has no good method of determining this.  They make political, not economic decisions and listen to whoever lobbies them the best.  This idea of economic calculation is how [Mises' predicted that socialism/communism would utterly fail](http://mises.org/humanaction/chap26sec1.asp). What I think Warren means is that people like him are really good at making money and setting things up to continue being rich. In Warren's case he's very good at evaluating businesses and if they would be good investments. In the micro this isn't really a problem. Instead the problem is on the macro-level. When enough potential market participants (i.e. people / businesses) aren't enabled to participate in the economy in the same way. This feeds into a growing wealth inequality. The people who have the resources to continue playing the game can also continue with more chances. It's a Pareto Principle situation. No opportunity to play, little to improve, and a continually disadvantaged population. Add time into the soup. Rich get richer, the poor poorer, the gap widens more. Add inflationary mechanics, and the fact that being poor is more expensive. Add debt and an inability to purchase for long term solutions. You get a situation where 99% of the money is cycling around in the top 1% of players.  The other 99% of potential market participants are poorly utilized up to the point where their wealth is something they have trouble spending for things like...healthcare.  The idea of poorly utilized market participants is key. A growing economy wants more bandwidth. It wants more agents or market participants contributing to the flow. Get rich enough and you'll find you can't spend more than the interest on investments. On the contrary if you don't have very much money, it's easy as hell to spend it quickly! It's straightforward to say that if more of the global population weren't in debt, if they weren't in a state where they can't participate in economic growth, then maybe the economic growth of human society wouldn't be so bottle-necked. I wrote about the dynamic of why either of a lower or higher exchange rate would be good for economies in Would dropping the value of its currency be good for an economy? A strong currency allows consumers to   import goods cheaply from the rest of   the world.  A weak currency allows   producers to export goods cheaply to   the rest of the world.  People are   both consumers and producers.    Clearly, there have to be trade-offs. Strong or weak mean relative to Purchasing Power Parity (i.e. you can buy more or less of an equivalent good with the same money). Governments worrying about unemployment will try and push their currencies weaker relative to others, no matter the cost.  There will be an inflationary impact (imported inputs cost more as a currency weakens) but a country running a major surplus (like China) can afford to subsidise these costs. Employment, output and inflation are your feedback. Too little spending manifests as a an output gap with elevated unemployment and low inflation. Too much spending shows up as full employment, full capacity and rising inflation as additional dollars just bid up prices.  Get it right and you have full employment with price stability.  So are we there yet? Well, it's not a static point we reach and cross but a dynamic balance in every period based on what's going on in the non-government sectors. Lately we've been leaning towards too little and the result is a tepid, stagnant recovery dragging on for years with elevated unemployment, weak growth and a persistant [output gap](http://lostoutputclock.com/). Nobody is suggesting that China hasn't had massive amounts of growth. However, even a relatively small discrepancy (for instance, 6.9% against 6.5%, similar to what appears in the article) can compound in to a huge difference over years.  If that relatively minute 0.4% spread were misreported since the 90s, that produces output gap of about USD $2 trillion (roughly 10% of the GDP).   It's hard to guess the magnitude of the inaccuracies, though some estimates exist, but I'd be willing to bet that the government never *under* reports growth.  Why do inflated assets matter? Because they lead to unrealizable capital gains on the balance sheet that gets counted in GDP, potentially producing reporting inaccuracies.  I agree with you that infrastructure projects drive a lot of China's growth, but again, the other drivers notwithstanding, there is a material difference between 6.5% and 6.9%. "I think anyone will agree that the ""optimal"" rate of taxation is the goal but what is optimal? It depends on your scoring metrics, the optimal solution to one problem might not be the optimal solution for another.   You bring up the Feds but that confounds the issue because now we have to talk about monetary policy, taxation is fiscal policy   In general lowering taxes increases capital investment regardless of the investment rate, the firm has more money they are going to spend it somewhere"