Definition : The ability not only to apply the grammatical rules of language in order to form “correct” sentences, but also to when to use these sentences and to whom. Thus involves knowledge of :
a) systematic (“formal” or "grammatical") potential
a) The expression He work in factory is systematically inaccurate.
b) The expression Give me a coffee! Is systematically accurate, but would not be appropriate as a request form in many situations.
c) The expression mother language is systematically possible but does not actually occur in the language.
d) The sentence This is the barn the corn the rat the dog the man owned chased ate was stored in is grammatically accurate, but not psychologically feasible as a spontaneous utterance. The brain "can't cope" with formulating or decoding it in real time.
The term was coined by Hymes in extension of Chomsky’s definition of grammatical competence, to show that knowledge of systematic potential alone was not adequate to explain the ability to communicate effectively in a language.