Home > Factors of production

• Land or natural resources - naturally-occurring goods such as soil and minerals. The payment for land is rent.
• Labor - human effort used in production. The payment for labor is 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 general sense, the payment for capital is called interest.

These were codified originally in the analyses of Adam Smith, 1776, David Ricardo, 1817, and the later contributions of John Stuart Mill as part of one of the first coherent theories of production in political economy.

1 Hard vs soft factors

In the classical analysis, capital was generally viewed as being physical items such as tools and machinery. With the emergence of the knowledge economy, more modern analysis often distinguishes this physical capital from other forms of capital such as " human capitalHuman capital is a way of defining and categorizing peoples' skills and abilities as used in employment and otherwise contribute to the economy. Many early economic theories refer to it simply as labour, one of three factors of production, and consider it" (economics jargon for education or training).

Also, some economists mention enterprise, entrepreneurshipEntrepreneurship is the practice of starting new organizations, particularly new businesses. Entrepreneurship is often a difficult undertaking, as a majority of new US business fail. Entrepreneurial activities are substantially different depending on the, individual capitalIndividual capital comprises inalienable or personal traits of persons, tied to their bodies and available only through their own free will, such as skill, creativity, enterprise, courage, capacity for moral example, non-communicable wisdom, invention or or just "leadership" as a fourth factor. However, this seems to be a form of labor or "human capital." When differentiated, the payment for this factor of production is called profitProfit is what is gained, after costs are accounted for. In accounting, this is usually measured in monetary terms. In economics, profit is most often measured differently, since costs are opportunity costs. Profit is income received by buying low and sel.

The classical theory, further developed, remains useful to the present day as a basis of microeconomicsMicroeconomics is the study of the economic behaviour of individual consumers, firms, and industries and the distribution of production and income among them. It considers individuals both as suppliers of labour and capital and as the ultimate consumers o.

2 Developments and Alternative views

Others focus on the central role of human capital, in particular the social capital (community trust) and instructional capital (actual worker's skills and instructions) that became increasingly important through the 20th century.

Most modern analyses usually cite four to seven types of capital, as in Natural Capitalism or the theories of intellectual capital. Brands have also been considered "brand capital", a special form of intangible firm-specific social capital distinct from that inherited from the larger society, in the analysis of Baruch Lev .