Factors of Production

The factors of production (or productive inputs), are classified into a number of broad categories.

These factors of production are the basic types of inputs whose presence is required to allow productive activity to occur.

The traditional factors of production are land, labor, and capital Opens in new window, to which the essential role of the entrepreneur Opens in new window is sometimes added, although more often it is not.

But even these four are not enough, so added to these is finance Opens in new window, without which most forms of productive activity could never occur.

And there is a sixth which is the knowledge Opens in new window, skills, know-how and abilities possessed by labor as well as the technological sophistication of the capital.

It is not merely more labor and capital that make an economy grow, but improvements in their productiveness, especially in what capital is capable of achieving.

And finally, although seldom discussed, time is itself a factor.

The time required for a process such as fermenting wine or growing timber must be included as a separate component in production since reducing the time required to complete some process is, of itself and separately from the others, an important way to increase the amount of output an economy can produce.