At low returns, you might question whether it’s good enough to invest more compared to other options (e.g., at 5%, maybe simply not incurring the added deficit to be financed at 5% is arguably preferable; at 7%, maybe your value function is such that simply not incurring the added deficit to be financed at 5% is arguably preferable), but at such high returns, unless you think the private sector is achieving a ballpark level of marginal returns, invest, baby, invest! The marginal returns would have to be insanely diminishing for it not to make sense to invest more, which implies we’re investing at just about the optimal level (if the marginal return of the next $1 were 0%, we shouldn’t invest more, but we shouldn’t invest less either because our current marginal return is 150%). Holding skepticism about the estimated return itself would be a different story.
At low returns, you might question whether it’s good enough to invest more compared to other options (e.g., at 5%, maybe simply not incurring the added deficit to be financed at 5% is arguably preferable; at 7%, maybe your value function is such that simply not incurring the added deficit to be financed at 5% is arguably preferable), but at such high returns, unless you think the private sector is achieving a ballpark level of marginal returns, invest, baby, invest! The marginal returns would have to be insanely diminishing for it not to make sense to invest more, which implies we’re investing at just about the optimal level (if the marginal return of the next $1 were 0%, we shouldn’t invest more, but we shouldn’t invest less either because our current marginal return is 150%). Holding skepticism about the estimated return itself would be a different story.