Factors of production

                        Factors of production                      

Factors of production are resources that are thought to be the basic building blocks of production in any economy. Land, labour, and capital are widely considered to be the three main factors of production. The factors of production are considered to be basic inputs that are absolutely necessary for the production of any good or service that is useful to final consumers. Entrepreneurship is also considered by many to be the fourth factor of production.

Some heterodox economists, however, consider land, labour, and time to be the three primary factors of production. They believe capital and entrepreneurship to be secondary factors of production in the sense that these factors are derived by first combining land, labour, and time. In the modern economy, physical capital such as machines, for instance, are produced by first mixing land and labour over a certain period of time. Only after this happens do we see capital being brought to life and used to produce other intermediate or final goods and services.

                         Marxist economists                        

Factors of production need to be collectively owned by the state. This was the driving philosophy behind centrally planned economies like the erstwhile Soviet Union in contrast to economies like the United States where factors of production are largely owned by private individuals or groups.

Economists from various free market schools of thought, however, strongly believe in the private ownership of all factors of production in an economy. They argue that private ownership offers resource owners the incentive to use the factors of production most efficiently, both in terms of avoiding unnecessary wastage and extracting the most value out of limited resources.