The Decision-Making Theory of Money

Reading carefully your previous post on the Water Analogy for the Economy, I would propose that it makes implicit use of the Resource Model of money. I can see that this theory of money is certainly valid in certain contexts, however I would maintain that it only captures part of the modern concept.
Suppose that we have an economy consisting of just one resource - say wheat. A certain number of people (call them farmers) make a bunch of wheat, which they give to other people in exchange for services such as harvesting the wheat, carrying the wheat etc. Some people take their wheat and store it in a silo in their back yard - this is your 'capital' or 'savings'. Other people use it to buy other services, or eat it. Along comes the government and they take 50% of the wheat that everyone received this year, and throw it away.
Just kidding - they take the wheat and give it to people that don't have any. In this way government is 'neutral' to the economy - they don't produce or eat any wheat themselves, they just re-distribute the wheat from one person to another. So now we introduce more resources - in addition to wheat, we have carrots and shoes. To manage the exchange of all these resources we generate an abstract generic resource which we call money, exchangeable for any other resource. I would venture that a lot of people have this model in their head when they think about money - and it is unquestionably an important concept, especially of commodity money and in the origin of exchange transactions.
However there is another arguably more important aspect to money in the modern economy. Suppose that you want to answer the question "how much wheat should we plant this year?". We can answer this from a top-down perspective - a committee is formed to determine how much wheat should be planted, and the farmers are then instructed to plant this amount of wheat. Or we can answer from a bottom-up perspective, where everyone is polled for their opinion on how much wheat they want, and this information is provided to the farmers. I would argue for a key axiom that on average the quality of a decision is proportional to the number of people making that decision. Now this is not a universal truth, if we developed an artificial intelligence that was smarter than the combined intelligence of 10 billion people, then it would be best to defer to the opinion of our machine overlords. However in the world of human beings, in general the more people that are involved in making a decision, the better the final decision will be. Money provides this function by aggregating the desires of the entire population and signalling this to the farmers via price. This process operates continuously across all resources, answering questions such as "how many shoes do we need?", "is it better to plant a bushel of wheat, or 5 carrots?", "is a large field in Texas better than a small field in Kansas?" etc. All these questions could in theory be answered by one, or a few individuals, but our axiom says that on average we get a better answer if we outsource the question to many people.
Now this is not a democratic process, where everyone has an equal vote. Every dollar is equal, but some people simply have more dollars than others. Money is therefore a proxy for decision-making power. The more of it you have, the more weight your decisions carry or conversely the more decisions you can make. If you have a lot of money, then you run around telling people what to do with their time and what goods to produce. In exercising your decision-making power you 'use up' your stock by delegating future decisions to other people (spending your money). Only if the decisions you make are on average good ones, do you accumulate future decision-making capability in the form of return on investments. On average, people who have accumulated capital are those who have demonstrated a track-record of good decision-making regarding what goods and services are needed. It is beneficial to the overall economy to give more weight to these people, as their past performance indicates that they are more likely to make better decisions (on average).
Now many (most?) of these decisions are self-serving. If I have a million dollars, I could decide to improve my local library, build a small clinic to provide medical services, or buy a large number of Gucci shoes. The last option provides no macro-economic benefit, the second may be beneficial if it is operated correctly - a financial return on my investment in the clinic is the signalling mechanism to tell me that I'm running it in the best way. The first option provides no return to me, but may be of important social benefit (along with services that require coordination such as roads, police etc.). We therefore put in place alternate mechanisms to ensure that these beneficial products and services are constructed by appropriating the decision-making ability of individuals through government taxation. We then bestow this decision-making power on a smaller group of people tasked with the job of making decisions in the public interest.
However in doing this we have converted bottom-up decision-making to top-down decision making, and run the risk of making bad decisions, as well as distorting the economic signalling mechanism. In the case of the wheat economy, if the government appropriates half of the decision-making, they may bias the farmers to produce too much wheat, or too little, as their knowledge of how much wheat is needed is necessarily less than the aggregate knowledge of all the individuals eating the wheat. However this may be an acceptable cost for the benefit of bypassing self-serving individualism and for long-term planning.
When viewed in this way there is no fundamental distinction between capital and income/expenditure. You have a certain amount of decision-making capability, which is your capital. You can use this to make decisions on the production of goods and services, or you may decide that no additional goods and services are required. Both of these are equally valid decisions. Encouraging additional production where none is required is as useless as discouraging needed production, so attempts to stimulate extra production are misguided, and detrimental to the macro-economy. You are substituting decision-making by the few in place of decision-making by the many.