Production is a process of creation wealth using labor, equipment, and natural resources. This is the processing of natural components to create products suitable for human life. Based on the definition, we can answer the question of what resources are needed to carry out production. In economic theory, they are called production factors. There are many of them, and they will be discussed below.
Concept: factors of production
They mean the most important element, without which any activity is impossible. These are resources that in economic theory are divided into:
- Economic - those that are directly applicable.
- Potential - not involved in production, but such a prospect is possible.
Resources in the production process, according to economic theory, is a combination of means created for the implementation of production processes, natural, spiritual and social potentials.
Resource Categories
At the moment, there are four of them:
- Natural - all that humanity can take useful from the environment. Land, forest, oil and seafood, metals, chemical compounds, etc. Traditionally, they are divided into renewable and non-renewable. The first are those that are restored after being used by a person. For example, forests. The restoration process, although it takes a lot of time, but still, after cutting down, you can plant many trees. Also, renewable scientists distinguish inexhaustible. This is the energy of the sun, wind, water, etc.
- Material - everything that is made artificially by man. Tools, machine tools, cars, tractors. You can list endlessly. This also includes equipment for production.
- Labor are people. Their work force. It is not only workers for production. Labor can be highly skilled. Architects, programmers, as well as other similar specialists, also relate to labor resources.
- Financial. This is capital, according to Karl Marx. Artificially created invention of mankind, which is a powerful stimulus to human activity. Money, assets and other valuable, in the understanding of only man, things without which the modern economy ceases to exist.
Now it becomes clear what resources are needed to carry out production. But one cannot make an equal sign and equate them with factors of production.
In economic theory, resources can be involved in production. For example, oil that has not yet been extracted. As long as minerals are not involved in the process of creating wealth, these are resources. As soon as they begin to actually be used, these are the factors of production. As you can see, the concepts are pretty close in meaning. In other words, factors of production are resources used.
Marginalist theory
It is interesting to note what resources are needed to carry out production according to marginalist theory. There are four of them:
- Earth - as you can see, it was allocated separately. In the understanding of this theory, this is natural resources.
- Labor - again coincides with the classical theory.
- Capital is the same investment resources.
- Entrepreneurial abilities. Here it is quite interesting, since no one distinguishes this category as the main one. Apparently, equipment for production and other technical innovations are not needed if a person has entrepreneurial abilities.
Other economists (Clark, Marx, Boehm) identify mainly these same factors of production. Some are narrower. Others - give preference to any one factor. For example, K. Marx believed that labor is the main thing on which everything else depends.
New resource of our time
Whatever economic theories of past centuries we take, at the present stage, information is one of the most important production factors. Some consider it key today. It is rather difficult to disagree with them. “Whoever owns the information owns the world” was not said for a beautiful phrase. This postulate contains the entire economic picture of our time. Ordinary inhabitants have little understanding of the significance of this resource. But you can give an example from the life of trading brokers. They will not share information for profit. Sometimes it happens that multibillion-dollar corporations can go broke at one point if important information about the market does not reach them.
Even law identifies information as a special valuable category. It is no accident that in almost all codes of the world one can come across such concepts as “commercial secret”, “non-proliferation of personal data”, etc. These categories make it clear the value of information today. An entrepreneur who has the exclusive right to receive information becomes a monopolist in certain areas, no matter what investments, natural and human resources his competitors might possess. Information as a factor of production is a consequence of scientific and technological progress.
Natural factors of production
These include:
- The earth. But not the desert sands of the Sahara. This concept refers to agricultural land.
- The woods.
- Ponds and groundwater.
- Minerals.
- Climate.
- Cosmic processes. Quite a dubious factor, but a meteorite fall, indeed, can destroy many plants and factories.
- Space (implied within certain territories and the planet as a whole). The ability of people, equipment to move from one object to another.
Capital as a factor of production
Economic theory subdivides it into the following types:
- Technical. In other words, these are means of production. Machine tools, equipment, machinery, computer hardware, etc.
- Financial. Money and securities.
- Human. Investing in a person who increases his labor productivity. For example, a copywriter who completed the course of the blind ten-finger method of printing on a computer starts working 5-6 times faster than he did before. With the same usefulness of work, its productivity increased significantly.
- Legal. Special rights that bring benefits to their owners. For example, shareholders receiving dividends.
To summarize. Now we know what resources are needed to carry out production. How do they differ from factors. We also note once again that all this is a set of means created for the implementation of production processes.
Summary
Thus, we can conclude that various economic theories as a whole distinguish the following types of production factors: natural resources, labor, capital, material and technical means (including equipment for production) and information as the newest factor of our time.
