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factors of production:
In economics, factors of production (or productive inputs) are the resources employed to produce goods and services. They facilitate production but do not become part of the product (as with raw materials) or are significantly transformed by the production process (as with fuel used to power machinery). To 19th century economists, the factors of production were land (natural resources, gifts from nature), labor (the ability to work), and capital goods (human-made tools and equipment). Recent textbooks have added entrepreneurship and "human capital" (labor's education and skills). [1] "Land" can include ecosystems while sometimes the overall state of technology is seen as a factor of production.[2] In any event, it is the scarcity of the factors of production which poses humanity's economic problem, often forcing us to choose between competing goals. The number and definition of factors varies, depending on theoretical purpose, empirical emphasis, or school of economics.[3]
Differences are most stark when it comes to deciding which factor is the most important. For example, in the Austrian view -- often shared by neoclassical and other "free market" economists -- the primary factor of production is the time of the entrepreneur, which, when combined with other factors, determines the amount of output of a particular good or service. However, other authors argue that "entrepreneurship" is nothing but a specific kind of labor or human capital and should not be treated separately. The Marxian school goes further, seeing labor (in general, including entrepreneurship) as the primary factor of production, since it is required to produce capital goods and to utilize the gifts of nature. It is unlikely that this difference of opinions between the "Austrians" and the Marxists will be ended soon. But this debate is more about basic economic theory (the role of the factors in the economy) than it is about the definition of the factors of production.
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