Your example doesn’t work because if money is invested into building factories, then the workers must be getting paid, which means that there is demand for food. If there are not enough food companies to satisfy this demand, then food companies would be growing faster than factories, and therefore a better investment. So increasing investments would increase food companies rather than factories in that case.
Anyway, the evidence that we are not at an optimum is supposed to be the fact that stock market returns are higher than GDP growth. Although to be honest I am a little confused about this: if stock market returns are consistently higher than GDP growth, then won’t the stock market eventually take over the world economy? Why hasn’t this happened already? If it does happen, then I guess we’ll see what the mostly-investment world is like.
Your example doesn’t work because if money is invested into building factories, then the workers must be getting paid
Yes, the workers get paid, and then they spend their wages to invest into the next factory, because they’re idiots who think that investment is always better than consumption. Of course, no sane people would actually do this, they would instead realize that once you have a lot of investment, the relative value of consumption (or, not starving to death) increases, and then they would buy a meal. I’m only pointing out the obvious, that 100% investment is bad, and that, maybe, 99% investment and 1% consumption is better, but probably still bad.
Anyway, the evidence that we are not at an optimum is supposed to be the fact that stock market returns are higher than GDP growth.
I’m not sure what that proves. It could be that the stock market generates a lot of real value, or it could be that it only generates a lot of money. Considering the “everyone invests” example, I don’t think that the investments would have low returns, at least until people started dying (let’s assume that there was some food stockpiled, prior to everyone going insane, so the famine takes a while to start).
Your example doesn’t work because if money is invested into building factories, then the workers must be getting paid, which means that there is demand for food. If there are not enough food companies to satisfy this demand, then food companies would be growing faster than factories, and therefore a better investment. So increasing investments would increase food companies rather than factories in that case.
Anyway, the evidence that we are not at an optimum is supposed to be the fact that stock market returns are higher than GDP growth. Although to be honest I am a little confused about this: if stock market returns are consistently higher than GDP growth, then won’t the stock market eventually take over the world economy? Why hasn’t this happened already? If it does happen, then I guess we’ll see what the mostly-investment world is like.
Yes, the workers get paid, and then they spend their wages to invest into the next factory, because they’re idiots who think that investment is always better than consumption. Of course, no sane people would actually do this, they would instead realize that once you have a lot of investment, the relative value of consumption (or, not starving to death) increases, and then they would buy a meal. I’m only pointing out the obvious, that 100% investment is bad, and that, maybe, 99% investment and 1% consumption is better, but probably still bad.
I’m not sure what that proves. It could be that the stock market generates a lot of real value, or it could be that it only generates a lot of money. Considering the “everyone invests” example, I don’t think that the investments would have low returns, at least until people started dying (let’s assume that there was some food stockpiled, prior to everyone going insane, so the famine takes a while to start).