Total Factor Productivity Growth = Totally Ficiticious Pretentious Garbage

In perhaps the most deliciously ironic example of misattribution of all time, Mark Twain is often held to have said “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so”. There is no evidence that Twain ever said or wrote those words, but the sentiment is indeed valid irrespective of the authorship. It resonates particularly on the subject of so-called total factor productivity growth (TFP). This once arcane topic has found its way into more mainstream discussions. For instance:

The productivity slowdown is a major explanation for the stagnation in real incomes…This seems to reflect weak investment and, above all, declining growth of “total factor productivity,” a measure of output per input of capital and (quality-adjusted) labour. TFP is a measure of innovation, of the ability to produce more valuable output with given quantities of inputs. Without innovation, the rising prosperity of the past two centuries would have been impossible. In truth, innovation…is almost everything.
The Financial Times, 12 June 2018

So why are rich countries growing so slowly? Part of it is due to the lingering effects of the Great Recession, but part is due to a slowdown in the rate of productivity growth. Productivity is any economy’s long-term underlying engine of growth: once you put all of a country’s people to work and provide them with as much capital equipment as they can use, further growth depends on the efficiency with which they can create goods and services – i.e. on productivity.
Bloomberg, 8 October 2018

China’s economy is slowing…After the financial crisis, China’s total factor productivity growth – a measure of how fast an economy increases the efficiency with which it uses labour and capital – suddenly began to fall, and has stayed low ever since.
Bloomberg, 15 January 2019