Factors of production: Difference between revisions

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Three factors of production -- [[land]], [[labour]], and [[capital (economics)|capital]] -- have been identified in classical economic theory. Modern theory still makes extensive use of this concept although many textbooks fail to include it in the index or table of contents.
A categorisation of the production process that was adopted for didactic purposes by classical economic theorists divides the contributory factors into the "primary factors"  of [[land]] and [[labour]], that exist independently of economic activity on the one hand, and [[capital (economics)]] on the other hand, defined as a product of economic activity that is used to further such activity. Later theorists have found it useful to depart from that categorisation by recognising that [[social capital]] and [[human capital]] make contributions to production that are analagous to those of classical capital although they are not products of economic activity.  


According to Paul A. Samuelson the three factors are further categorised into ''primary factors'' (''land'' and ''labour'') and the derived or produced factor, ''capital'': ''A primary factor is... produced or given outside of the economy... rather than produced by the economic system''.<ref>Samuelson and Nordhaus ''Econoics'', pp.50 (1989).</ref>
As explained in the article on the [[philosophy of economics]], economists' statements about the factors of production are tautologies rather than factual statements about the real world.
 
 
 
==References==
<references/>

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A categorisation of the production process that was adopted for didactic purposes by classical economic theorists divides the contributory factors into the "primary factors" of land and labour, that exist independently of economic activity on the one hand, and capital (economics) on the other hand, defined as a product of economic activity that is used to further such activity. Later theorists have found it useful to depart from that categorisation by recognising that social capital and human capital make contributions to production that are analagous to those of classical capital although they are not products of economic activity.

As explained in the article on the philosophy of economics, economists' statements about the factors of production are tautologies rather than factual statements about the real world.

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