Factors of Production:
Every single one of my classes at UNA is required to endure a lecture I give every term
dealing with ‘WHY?’
If you have ever had an elementary Economics course you may remember the four
factors of production. At a young age (my Daddy is an Economics professor) these
concepts were drilled into me….the four factors of production are often listed as
LAND
LABOR
CAPITAL
ENTREPRENEURIAL ABILITY
The production factor of LAND is pretty obvious… it takes some amount of land to
produce a bale of cotton (this is the south, so we need a southern example!) a bushel of
corn or a pound of beef. However, most of the productive activities most of us are
involved with do not really require or use much LAND. Outside of a place to put our
desks, we require very little land to produce our goods and services.
LABOR… this is really what most of us sell (or trade). We ALL sell our labor, we trade
our time for the goods and services that we need/want. Whether, short order cook, skilled
machinist, airline pilot, waitress or university professor…. We all sell part of our lives to
get the things we need and want.
Interestingly, it could be said that the only thing we have of value is our time. We have a
limited lifespan, a limited number of days and hours. This is pretty much the only thing
we have as individuals to trade.
SO what is CAPITAL? When I ask this question in class, students often answer ‘money’
‘$’ While this is true, CAPITAL is much more. CAPITAL is the term given to the tools
that increase productivity. CAPITAL can be the tractor and implements required to
produce that bale of cotton, CAPITAL can be a drill press or machine tool, CAPITAL
can also be the knowledge and skills that allow you to produce a good or service!
So why are you spending several hundred dollars and a big chunk of your time on this
GIS course? You are building capital. This course is an investment in CAPITAL. At the
conclusion of this course you will have developed a skill set that will able you to produce
services that were previously impossible. You should be able to add CAPITAL from this
course to you LABOR and increase your productivity. And when you increase your
productivity … you increase your economic value!
How about that last factor of production, ENTREPRENEURIAL ABILITY, what does
this mean? I’ll ask you the same question I ask students in class… how did Bill Gates
become the richest individual in the world? Certainly, he has some LAND (Microsoft
has to sit on something), but this is not the key to his wealth. Certainly, he has spent his
LABOR and any skills he accumulated (CAPITAL)… but again, this does not answer the
riddle of his wealth.
He has sold ideas… now they may be his own ideas or he may have stolen some of the
ideas from other people (likely a little of both)… nonetheless, IDEAS and the willingness
to take a risk to see a future nobody else clearly sees are the characteristics that set an
entrepreneur apart.
As you are investing in CAPITAL to increase your economic value, I encourage you to
consider adding this most potent factor of production to your economic portfolio. See
opportunities to sell your ideas, learn to recognize the services you have that can be
traded in a new way. Add that final factor to your economic productivity!