And even this understates the change in projections, because it’s not just the future that isn’t what it used to be, but the past. In Figure 3, Greece is shown as having had a drastically overheated economy, operating far above sustainable levels, in 2007 and 2008. But few people said that at the time. In fact, the IMF’s own estimate as of early 2008 was that in 2007 Greece was operating only 2.5 percent above potential, compared with its current estimate of 10.7 percent for the same year.

What’s going on? The IMF’s method for calculating potential GDP basically reads any sustained slump as a decline in potential output relative to previous expectations, and this interpretation of decline affects both its projections of the future and its interpretation of the past: if it concludes that potential output in 2010 was really low, the IMF marks down its estimates of potential in previous years too.

Which brings me to a second possible explanation of the Great Shortfall: maybe it exists only in the minds and models of policymakers (or, actually, their technical experts), and isn’t a real thing at all. That is, the belief that our economic potential has fallen far below previous expectations doesn’t represent an actual economic ailment, but instead reflects policymakers’ hypochondria.

After all, how is potential output calculated? The details are complex, but basically such calculations rely on one or both of two theories: that slumps and booms are always short-lived, and/or that inflation is an “accelerationist” process.

Suppose, first, that you start from the assumption that deviations of actual GDP from potential GDP tend to be eliminated over the course of a few years at most, with the economy surging after slumps and stagnating or shrinking after booms. In that case, you believe that the average difference between actual and potential GDP will be roughly zero over any extended period, which means that you can get an estimate of potential GDP by taking actual GDP and applying some kind of statistical method that smooths out the fluctuations.

Suppose, alternatively, that you believe – as most mainstream economists did not long ago – in some version of Milton Friedman’s “natural rate” hypothesis. According to this hypothesis, an economy running above potential output will experience not just inflation but accelerating inflation, while an economy with persistent slack will experience ongoing disinflation, with the inflation rate falling continuously and eventually turning into accelerating deflation. If this hypothesis is true, you can in effect infer where we are relative to potential by asking what’s happening to inflation: if it’s stable, the economy is producing roughly at potential.

In the light of post-2008 experience, however, it’s clear that both of these theories are wrong. When interest rates hit zero, it’s far from clear why or how the economy will quickly recover, since the usual way we bounce back from a slump – the central bank cuts interest rates, boosting spending – can’t happen. Meanwhile, thanks in part to the reluctance of employers to cut wages even in the face of high unemployment, even obviously depressed economies seem at worst to experience low inflation, not an ongoing slide into accelerating deflation.