Total Factor Productivity needs a rebrand (and if you don't know what that is you probably should).

The name of this hidden driver of prosperity is unappealing and not self-defining to mainstream people. What should it be called instead?

If you don’t know about Total Factor Productivity (TFP), you probably should. It’s an economic concept that is arguably the most important driver of long-term economic prosperity. An International Monetary Fund (IMF) primer on TFP explains it like this (emphasis added):

It’s a measure of an economy’s ability to generate income from inputs—to do more with less…If an economy increases its total income without using more inputs…it is said to enjoy higher TFP [Total Factor Productivity].

TFP is an important macroeconomic statistic [because] improvements in living standards must come from growth in TFP over the long run. This is because living standards are measured as income per person—so an economy cannot raise them simply by adding more and more people to its workforce.

Meanwhile, economists have amassed lots of evidence that investments in capital have diminishing returns. This leaves TFP advancement as the only possible source of sustained growth in income per person, as Robert Solow, the late Nobel laureate, first showed in a 1957 paper.

So, it’s important. Critically important to long-term progress. To learn more about TFP, check out the full IMF primer referenced above and then this post I wrote about TFP titled “The key to increasing standard of living is increasing labor productivity,” which also has more links embedded in it. It explains how the only sustainable way to increase TFP is to “to invent new technology that enables workers to do more per hour.” And this is why I’m always going on and on about increasing research funding.

Let’s assume for a second that most people want more prosperity and that long-term prosperity does indeed primarily flow through Total Factor Productivity. Then why aren’t we talking about TFP a lot more? Why isn’t Total Factor Productivity front and center in our political agendas?

I think there are a host of reasons for that, including those I outlined in the paradox of progress. But another even simpler reason has to be that Total Factor Productivity is a terrible, inscrutable name, at least from the perspective of selling the concept to the mainstream public.

Every word of it isn’t great. It starts with “total,” which isn’t as off-putting as the other words, but doesn’t add much especially as the first word, let alone the fact that economists quibble that it isn’t an actual total. “Factor” seems like a math word and doesn’t add much either. And then you have “productivity,” which is confusing to most people because it has an unrelated colloquial meaning, and from a political perspective it also codes as job-cutting which is inherently unappealing.

Now, lots of economics jargon has similar problems, case in point “Gross Domestic Product” (GDP). Given GDP hasn’t been rebranded, I doubt TFP will either. That said, I think for anyone trying to communicate this concept to the public, we shouldn’t take the TFP name or acronym as a given, but try to use something more appealing and inherently understandable.

I’m looking to switch to something else but not sure to exactly what. My thinking so far has led me to work in the words “prosperity” or “innovation” directly like:

• Prosperity Driver

• Prosperity Component

• Innovation Multiplier

Do you have any other suggestions?