Spending Model

After a tiring day I am in the balcony, leaning against the wall, trying to relax and fell the breeze. I wonder whether these are the moments that recharge me and keep me going in this restless city. Was just about to wade in the deeper thoughts when a repeated thrashing sound caught my attention, as usual it is the train rushing past the apartment building. It is the neighboring station which makes the apartments costly and the same train balances the cost by its noise.

Any way it is a great service which keeps the city going. A great invention but takes a whole lot to build. Even burdens the governments which we often see rescuing institutes in trouble. How should the government spend its money? After all its not its own money it belongs to the people it comprises of, people it is answerable to, people who trust it. How should decision be made to spend even a single penny.

Should it spend a lot as it is its spending which mobilizes the markets, puts dispensable money in the pockets, or should it always operate at break even spending just the right amount so as to serve the very cause it was made for. Well savings can also come in handy to support the rest and keep the fund for the calamities.

Every spent penny can be seen as an investment the government makes in the society. The decision making, I feel, should have assumption of perpetual operation, as is done in case of organization of strategic importance. Say the military many portions are never audited but still the decision has to be made and it should be justifiable.

The perpetual decision making should assume the infinite life of the investor or at least greater than the effective life of the investment. Thus making every investment which pays back over its life time as a valid investment.

To put it mathematically....

If Return over the life time of the investment/ Investment >= 1 ;

investment should me approved, and vice versa.

It seemed like a prety good option for evaluation but then these organisations which use this method are not supposed to make any revenue or increment in value over time. But the nation as a whole is expected to progress with time and not be stagnant. To remove this fallacy a slight modification in the equation will be needed it.

If Return over the life time of investment/ Investment >= 1+ Inflation proof Govt. bond rate ;

then the investment should be approved and vice versa

All these investments will improve the social standards at the same time keeping pace with the targeted growth rates of the national economy.