![]() ![]() In their view, laborers and artisans were powerless and in excess supply, and hence they earned on average only a subsistence-level income. ![]() It is intended to represent the contribution to production of nonhuman resources as found in their original, unimproved form.įor the French physiocrats led by Francois Quesnay in the 1750s and 1760s, land was the only factor yielding a reliable gain to its owner. This category sometimes extends over all natural resources. One intuitive basis for the classification of the factors of production is the manner of payment for their services: rent for land, wages for labor, interest for capital, and profit for entrepreneurship. A major conceptual application is in the theory of production functions. These include models purporting to explain growth, value, choice of production method, income distribution, and social classes. The factor concept is used to construct models illustrating general features of the economic process without getting caught up in inessential details. Entrepreneurship is a fairly recent addition. Before the twentieth century, only three factors making up the classical triad were recognized: land, labor, and capital. However, economists seek to classify all inputs into a few broad categories, so standard usage refers to the categories themselves as factors. Of course, in a literal sense anything contributing to the productive process is a factor of production. ![]() Land, labor, capital, and entrepreneurship: These are four generally recognized factors of production. ![]()
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