We explain what the factors of production are, what they are for and what are the main characteristics of each one.
What are the factors of production?
In economyProduction factors are known as inputs and resources, both human and of another nature, on whose availability and correct management depends the generation of wealth in any economic system. In other words, the "inputs" of any production process are called thus, without which an "output" cannot be obtained: the satisfaction of the needs for goods and services of human being.
Production factors are understood as especially those inputs whose abundance is not absolute, as may be true natural resources (the air atmospheric, for example). And in general terms, four major factors are always considered in any production process: land, work, capital and organization / knowledge.
As will be understood, production depends, in principle, on these factors, and therefore also income and income. spending any business human. However, it is possible that these four factors vary in their point meaning as the world changes and our industrial and consumer processes as well. Thus, for example, the "land" factor was vital in an agricultural consideration of the world and represented exactly that: land tenure for sowing; something that had to be re-signified after the advent of industrial society.
The earth
Today's understanding of the need for land is broader than just owning land. The latter is particularly valid for agricultural production, but in the case of industrial or post-industrial models of production it refers rather to the resources found in the Earth crust, and that can be of mineral, organic, biological origin, etc.
That is, from the Petroleum, the different minerals, the wood of the woods or the fruits grown in a field are considered part of the land factor, and are usually considered the basic elemental factor, the primary material input, from which the process of changes that is production takes place.
This, of course, will depend on the economic activity to which we refer. For example, a company of software it will not require any type of land, beyond the physical space in which its offices are located. Instead, a real estate company will consider land as its sole and primary input.
In particular the nonrenewable resources (Like the fossil fuels) have a very aggressive market in their competition, and the countries that have these resources in abundance tend to be favored in their terms of trade. The payment to the land factor is the one that must be paid for the use of the natural resources.
The job
Work refers to the various efforts that an individual faces to carry out a product or service to the consumer market, which may well be in many ways. The labor of production itself in which, for example, a farmer grows certain fruits is work; but also the collection and conduction of said fruits to the place where they are processed, and from there to the industry that turns them into food. The same goes for the person in charge of to distribute these foods, and to sell them to potential buyers. Services are also work, so that a company in this sector offers its customers, essentially, a specialized type of work.
In the capitalist system, workers are rewarded for this labor effort with a salary, calculated based on the hours of work performed and the level of professionalization or specialization that said work represents. To the workers highly qualified are known as human capital and their generation in a country or a society It is what motivates the existence of an educational system, especially the one oriented towards practical knowledge.
Capital
For capital It is understood, typically, to money, that is, to the monetary and financial resources that allow to start a productive process, either by providing it with its basic inputs or by serving to pay its workers.
However, money is not directly involved in the production of a good or a service, which is why capital is usually understood as the acquisition of the material resources essential for production to take place. For example, a tractor is necessary for the agricultural production, the same as desks and computers for the production of a software company.
Similarly, we speak of human capital to refer to the quantity and quality of workers in a organization, as well as the money that it invests in its education and professional improvement, to enjoy a workforce more suitable and of greater value.
These types of resources are known as investment and they are deducted from the income produced by the company to distinguish between the capital required for the continuation of the process or even for its expansion, Profits thrown by the production process.
The organization / knowledge
This last factor refers to the methodology of production employed, that is, to the way in which the other factors are coordinated and orchestrated in favor of a sustained and profitable production. It is useless to have capital and land if you do not have the knowledge specifically for planting, or if it is planted in such a way that inputs are wasted and cost effectiveness be minimal.
We are therefore talking about the know-how (knowing how) of the production process, and in that it refers to both the basic knowledge of production, to the methods used and the scheme administrative organization. Many authors prefer to call this factor entrepreneurship or entrepreneurship.