The circular flow model needed a lot of work. So I worked on it. Many numbers were not jiving. So I went into the laboratory.
In the laboratory I first had to get the accounting right. Then I had to find the right numbers. Then I had to apply a process of deduction to get the circular flow to come out correct. The numbers were found through the U.S. Bureau of Economic Analysis website. They have interactive tables there for national income accounts. I used numbers from those tables. I will specify the lines from the tables for the numbers below.
Here is the product. These are numbers from 1st quarter 2011. (billions of 2009 $$).
Let's start at the bottom of the flow and work up. I will state the number and then how it was determined. For all tables, go to this BEA link. The numbers for 1st quarter 2011 are in the first column as of today.
- In-coming GDP... table 1.1.6, line 1. (real GDP)
- Consumption... table 1.1.6, line 2
- Govt. spending... table 1.1.6, line 22
- Investment... table 1.1.6, line 7
- Net exports... table 1.1.6, line 15
Note: The four account numbers do not add up to the GDP number. There is a residual in the data.
- Exports... table 1.1.6, line 16
- Imports... table 1.1.6, line 19. (Imports is made negative because it is the loss of funds from the circular flow.)
- Govt. borrowing... I did not find this number in real 2009 dollars, so I took the ratio of nominal numbers to determine this number. First number... Government consumption, table 1.1.5, line 22. Second number... Net government saving, table 3.1, line 26. I divided the second number by the first. Then I applied that ratio to the Government spending number in real 2009 dollars.
- Net taxes (total)... Govt. spending minus Govt. borrowing.
- Saving (total)... Difference between imports and total net taxes.
- Lend (-)/borrow... This is the combined amount that the financial sector gives to the government and to currency exchanges for exports. It has two ways to be determined. One, Investment minus Saving. Two, the negative of exports plus govt. borrowing.
Now we go to the upper half of the circular flow.
- Out-going GDI... table 1.1.6, line 1. (real GDP)
- Effective labor income... effective labor share * GDI
- Net tax rate (labor)... table 2.1, line 26 divided by line 1.
- Net taxes (labor)... net tax rate * effective labor income
- Saving (labor)... I first find the percentage of household net saving to total net saving. Table 5.1, line 8 divided by line 3. Then I multiply that number by total saving below, $5370 in graph.
- Imports (labor)... In this model, Total income = consumption + taxes + saving + imports. I subtract taxes from both sides to get disposable income. Disposable income = total income - net taxes = consumption + saving + imports. We already know labor disposable income from effective labor income minus labor net taxes. Now we need the personal saving rate. The personal saving rate is equal to funds other than consumption after taxes (saving + imports) divided by disposable income. Thus, imports = personal saving rate * disposable income - saving. We already have labor disposable income and labor saving. I find the personal saving rate in table 2.1, line 35.
Note: The difference between imports and saving is what a person actually saves. If labor imports are greater than labor saving, households have a negative saving rate. If labor imports are less than labor saving, households have a positive saving rate.
- Consumption (labor)... effective labor income - labor net taxes - labor saving - labor imports
- MPC (labor)... labor consumption/labor disposable income... (marginal propensity to consume)
- MPS (labor)... (labor saving - labor imports)/labor disposable income. (MPS = personal saving rate) ... (marginal propensity to save)
Note: The percentages next to the labor numbers are just their percentage of total labor income. The same applies to capital.
This completes the labor section. Now we move to the capital income section.
- Effective capital share... 1 - effective labor share
- Effective capital income... effective capital share * GDI
- Net taxes (capital)... total net taxes - labor net taxes
- Net tax rate (capital)... capital net taxes/effective capital income
- Saving (capital)... total saving - labor saving
- Imports (capital)... total imports - labor imports
- Consumption (capital)... total consumption - labor consumption
- MPC (capital)... capital consumption/capital disposable income. (capital disposable income is equal to capital income minus capital net taxes.)
- MPS (capital)... (capital saving - capital imports)/capital disposable income
Comments on getting better numbers would be appreciated. The government does not provide data specifically for this flow. So some percentages were used to represent the "effective" laborer and the "effective" owner of capital. I am sure the numbers aren't perfect, but they begin to reveal insights not seen before.
There you have it. I hope you find it as interesting as I do.