Economy
Total Factor Productivity (TFP)
Definition
The portion of economic growth not explained by increases in labor or capital — measuring technological progress, innovation, and efficiency improvements.
Explanation
TFP is the "secret sauce" of growth — it captures how well an economy combines its inputs. Advanced economies rely on TFP for most growth since they can't simply add more workers or machines. TFP growth has slowed globally since the 1970s, though AI may reverse this trend.