Productivity is variable in the short term and it is everything in the long run

In the Notes for Discussion 1-3, we discussed the demographic projections by the Hellenic Statistical Authority (ELSTAT) for the future population of Greece, the working-age population (15-64), and employment and unemployment. The argument was that the macroeconomy is anchored in the size of the population, and that if the population starts declining, then the size of the economy will be restricted. Since Greece is struggling with a legacy debt problem, a potentially smaller economy in the future is an important factor when thinking how best to manage the economy going forward and in particular the resolution of this debt problem. The first three notes focused on volume input of labor - by how many the number of employed persons may rise or fall in the future. A second variable that determines the potential size of the economy, or potential output, is how productive these future...