Natural, human and man-made factors used in the production of goods and services
  • Capital Goods - Tools, machinery and other man-made elements used to produce goods and services
  • Entrepreneurship - Managerial skills and willingness to take risks in the production of goods and services
  • Labor - Human physical and mental skills available to produce goods and services
  • Land - Natural resources available for producing goods or delivering services


Factors of production - Wikipedia, the free encyclopedia
"Factors of production are resources used in the production of goods and services in economics. Classical economics distinguishes between three factors: Land or natural resources - naturally-occurring goods such as soil and minerals that are used in the creation of products. The payment for land is rent. Labor - human effort used in production which also includes technical and marketing expertise. The payment for labor is a wage. Capital goods - human-made goods (or means of production) which are used in the production of other goods. These include machinery, tools and buildings. In a general sense, the payment for capital is called interest. ..."


General Observations Concerning the Theory of Rent, by Ludwig von Mises, Human Action, 1949
Chapter 22 "The Nonhuman Original Factors of Production", section 1; explains that the differential rent concept, formulated by David Ricardo, can in general be accepted within modern economics, whereas the residual rent idea is incorrect
"The modern theory of value and prices is not based on the classification of the factors of production as land, capital, and labor. Its fundamental distinction is between goods of higher and of lower orders, between producers' goods and consumers' goods. When it distinguishes within the class of factors of production the original (nature-given) factors from the produced factors of production (the intermediary products) and furthermore within the class of original factors the nonhuman (external) factors from the human factors (labor), it does not break up the uniformity of its reasoning concerning the determination of the prices of the factors of production."
Related Topic: Land
Give Me Liberty, by Rose Wilder Lane, 1936
Originally published as an article titled "Credo" in the Saturday Evening Post; describes her experiences in and history of Soviet Russia and Europe, contrasting them with the history of the United States, emphasizing the individualist themes
"Americans have been exploiting the natural resources of half a continent. And this exploitation is continuing now and should resume its accelerating rate of speed, for our unused natural wealth is enormous. ... But natural resources alone do not explain our relatively greater wealth, for while Americans have been exploiting America, Europeans have been exploiting Asia, Africa, South America, the Ease Indies, the West Indies, Australia and the South Seas."
Simon, Julian (1932-1998), by Donald J. Boudreaux, The Encyclopedia of Libertarianism, 15 Aug 2008
Biographical essay
"Simon argued there are no resources without human creativity to figure out how to use them and human effort to actually do so. Petroleum, for example, is certainly not, by its nature, a resource. If it were, Native Americans would long ago have put it to good use. But they did not. Petroleum did not become a resource until creative people determined how it could be used to satisfy some human desires and other people determined how it could be cost-effectively extracted from the ground. An implication of this realization, that humans are 'the ultimate resource,' leads to the conclusion that a high and growing population ... is desirable."
Related Topic: Julian Simon
TANSTAAFL, There Ain't No Such Thing as a Free Lunch, by David R. Henderson, 3 Mar 2014
Explains the two meanings of TANSTAAFL: the scarcity of economic resources (and the need for tradeoffs) and the expectation of some kind of reciprocity when something is offered for "free"
"What is a scarce resource? You could count the pineapples in Hawaii, the Mercedes Benzes in Beverly Hills, and the steel in South Korea, and you still wouldn't know whether they are scarce. Here's how you would know: At a zero price (and not a price set at zero by government regulation or caused to be zero by a government subsidy), is there enough of the good to satisfy everyone's demands? If not, the good is scarce. This means that the vast majority of goods are scarce. There are a few non-scarce goods, which economists call 'free goods.'"
The Austrian Economists, by Eugen Böhm von Bawerk, The Annals of the American Academy of Political and Social Science, 1891
Explains some of the major tenets of the Austrian school -just two decades after publication of its seminal treatise, contrasting them with the views of classical economics and the historical school; paper solicited by the editors of the magazine
"Since several factors of production -- soil, capital, hired labor, and labor of the employer himself -- cooperate in the production of a common product, the question as to what share of value shall be assigned to each of the factors, in compensation for its assistance, is obviously a special case of the general problem."
The Brilliance of Turgot, by Murray Rothbard, 1986
Biography and review of Turgot's major writings; introduction to The Turgot Collection
"First, Turgot examines an isolated man, and works out a sophisticated analysis of his value or utility scale. By valuing and forming preference scales of different objects, Crusoe confers value upon various economic goods and compares and chooses between them on the basis of their relative worth to him, not only between various present uses of goods but also between consuming them now and accumulating them for 'future needs.' Like his French precursors, Turgot sees that the subjective utility of a good diminishes as its supply to a person increases; and like them, he lacks only the concept of the marginal unit to complete the theory."
The Idea of a Private Law Society, by Hans-Hermann Hoppe, Mises Daily, 28 Jul 2006
Discusses the problem of social order, i.e., rules to regulate the use of "everything scarce so that all possible conflicts can be ruled out"
"Suppose ... all external goods are available in superabundance. They are 'free goods,' just as the air that we breathe is normally a 'free' good. ... Hence, it is impossible for there ever to be a conflict between Crusoe and Friday concerning the use of such goods. A conflict is only possible if goods are scarce. Only then will the need arise to formulate rules that make orderly, conflict-free social cooperation possible."
The Nature and Significance of Economic Education: Economists Should Pursue Their Science with Objectivity, Detachment, and Passion, by Israel Kirzner, The Freeman, Oct 1998
Explains why economic education of both the general public and politicians/legislators is needed and why a teacher, such as Mises, must remain scientifically detached (value free) even if passionate about the teaching goals
"Economic understanding requires one to see the 'objects' with which economic activity is concerned—the money, the natural resources, the capital equipment, the flows of half-finished goods, the fully produced goods ready for delivery to the consumer—from a subtly different perspective from that to which the layperson has been accustomed."
The State of Humanity: Good and Getting Better, by Sheldon Richman, Julian Simon, 11 Nov 1996
Contrasts a pessimistic 1980 prediction on the state of the world in the year 2000 with the actual state in the mid-1990's.
"Since antiquity, people have worried about running out of natural resources. Yet, amazingly, all the historical evidence shows that raw materials — all of them, even oil — have become more abundant rather than less. ... The ultimate resource is people — especially skilled, spirited and hopeful young people endowed with liberty — who will exert their wills and imaginations for their own benefit and inevitably benefit the rest of us as well."