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LAND, LABOR, AND CAPITAL Resource categories in economics distinguish among such factors of production as:
Classical economics The distinctions above were first developed in Classical Economics , including the work of Adam Smith (1776), David Ricardo (1817), and the later contributions of Karl Marx and John Stuart Mill as part of one of the first coherent theories of production and distribution in Political Economy . Marx in '' Das Kapital '' refers to the three factors of production as the "holy trinity" of political economy. Working capital was generally viewed as being a stock of physical items such as tools, buildings and machinery. This view was explicitly rejected by Marx. Classical economics developed the Labor Theory Of Value as part of the theory of distribution. Neoclassical economics Neoclassical Economics continued the distinction of land, labor, and capital. It developed an alternative theory of value and distribution. For a modern discussion about problems in defining and theorizing about the neoclassical theory of capital, see Capital Controversy . A FOURTH FACTOR? Marshall introduces organization as a fourth factor of production; J.B. Clark gives the co-ordinating function to entrepreneur; Professor Knight introduces managers who co-ordinate. Some economists mention enterprise, Entrepreneurship , Individual Capital or just " Leadership " as a fourth factor. This is when Entrepreneur s think of ideas, organise the other three factors of production, and take risks with their own money and the financial capital of others. Others consider this to be a form of labor or "human capital." When differentiated, the payment for this factor of production is called Profit . In a market economy, entrepreneurs combine the other factors of production, land, labor, and capital in an innovative way to make a profit. In a planned economy, central planners decide how land, labor, and capital should be used to provide for maximum benefit for all citizens. Further distinctions from classical and neoclassical Microeconomics include the following:
FREE TRADE AND MOVEMENT OF FACTORS OF PRODUCTION Free Trade Laissez Faire theory argues that Economic Efficiency is achieved in cases where free movement ( Laissez Passer ) of the "factors of production" is permitted. Karl Polanyi in " The Great Transformation ", however, argued that historically whenever laissez faire policies are adopted, legal moves to prevent the free movement of one of the factors of production always occur (for example current Neo-liberal attempts to free the movement of Capital and Resources are today increasingly tied to Immigration Control s). HUMAN CAPITAL AND INTELLECTUAL CAPITAL Contemporary analysis distinguishes Capital Goods from other forms of capital such as Human Capital . Human capital is acquired through education and training, whether formal or on-the-job. A more recent coinage is Intellectual Capital , used especially as to Information Technology . Prior to the Information Age the land, labour, and capital were used to create substantial wealth due to their scarcity. During the Information Age (circa 1971-1991), the Knowledge Age (circa 1991 to 2002), and the Intangible Economy (2002-present) the primary factors of production have become less concrete. These factors of production are knowledge, collaboration, process-engagement, and time quality. According to economic theory, a "factor of production" is used to create value and economic performance. As the four modern-day factors are all essentially abstract, the current economic age has been called the Intangible Economy. Intangible factors of production are subject to Network Effects and the contrary economic laws such as the law of increasing returns. It is therefore important to differentiate between conventional (tangible) economics and intangible economics when discussing issues related to factors of production which change according to the economic era that society is experiencing. For example, ''land'' was a key factor of production in the Agricultural Age. SEE ALSO
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