To the neo-classicals, you can't have too much capital, as long as its ROR is above zero. They discount or ignore social impacts and other trade-offs, as well as distributional considerations.
> . . . If a huge source of money
> like Social Security income goes to investments, prices
should go
> sky-high, and returns should dwindle to almost nothing.
And I'm
It's not clear that SS is so huge that investing it in private assets would affect their price to a great extent.
I don't think your wage-cutting story flies. Too devious.
I think it's much simpler. A primordial, reactionary economic tenet is to reduce consumption for the sake of saving. Reductions typically do not affect elites. Reducing consumption frees up resources available for the machinations of elites -- whether it's building up the capital stock, waging war, acquiring colonies, or concentrating their power. These goals all trump the mundane consumption needs of the unwashed masses.j
Now clearly an economy needs some saving and capital formation, properly defined, to grow and progress. To me the issue with the savings mania is that the price of expanding "savings" in light of the benefits is grossly understated. Actual effects are typically glossed over. In genuine efficiency theory, incidentally, you can have too much saving, not just too little.
mbs