I do wonder what the answer is here, not just for ourselves but also the Spurs/Arsenals/Liverpools of the world. The key question is this: what is the right thing for a football club to 'solve' for? Is it some kind of discounted cash flow? Trophies in the next x years? Because those two things would push towards different actions.
If you look purely at optimising profit, I'd strongly wager the best path is to spend the minimum to guarantee a Champions League spot. Once you're in that position, incrementally spending to get 1,2,3 probably doesn't stack up against the required amounts. And that would be in a 'normal' sports league.
But we don't exist in one of those. At the top of the pedestal - for the forseeable future - is a club that has no need to optimise at all. It's like clubs 2-5 are all trying to win a race by trade-offs between handling, engine, weight etc, and the top club uses a car from a different class. The reason that is important is because it leads to the question: why on Earth would Ed spend, say, $75m on a player he believes could move us from 3rd to 2nd. Or 4th to 2nd, whatever. We will not generate $75m incremental revenue from that player, so it, in terms of a business, be a bad decision. And worse, what if Ed does sanction all that spend in an effort to finally get to 1st, and then City just go and replace all of their full backs, for example. Or buy 3 new strikers with the hope that one will be able to replace Aguero. It's financial suicide to compete.
Again, purely from a business standpoint. But it's crucial to acknowledge that is Ed's job. It isn't to win us trophies, unfortunately. It isn't to get us to the top of the league, or back into the footballing elite.
We (cough, Fergie, cough) allowed this to happen. But getting angry at Ed and the owners for not behaving as if footballing success is all that matters is just a waste of energy. Ed should be spending exactly as little as possible as to ensure we're in the CL next year. And not a penny more. So should Levy and the other CEOs. It sucks, but that's what football is these days.