National Income Release Likely shows High MPK

Part of BEA's update today of 2008 Q3 GDP is a first release of 2008 Q3 National Income. It includes corporate profits, which permit me to calculate a marginal product of capital for the corporate nonresidential sector. Corporate profits declined less than 1%. Capital income more broadly decline less than 1%.

Before this release, my best guess was capital income was "down about 0.6%" Q2 to Q3.

I am still making a final calculation of the Q3 marginal product of capital, but a 1% capital income decline is trivial; in order for the marginal product of capital to decline from its recent highs to more normal levels, capital income would have to fall 10s of percentage points.

This is quite different from the 1930s: the marginal product of capital was already quite low when the major bank panics hit. Today corporate profits are $1.5 trillion dollars per year and capital income more than $3 trillion per year. That's enough to pay for a lot of investment without banks' help.