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Classical economics distinguishes between three factors of production which are used in the production of goods: Economics (deriving from the Greek words οίκω [okos], house, and νέμω [nemo], rules hence household management) is the social science that studies the allocation of scarce resources to satisfy unlimited wants. ...

  • Land or natural resources - naturally-occurring goods such as soil and minerals. The payment for land is rent.
  • Labor - human effort used in production. The payment for labor is a wage.
  • Capital goods - human-made goods (or means of production) which are used in the production of other goods. These include machinery, tools and buildings. In a general sense, the payment for capital is called interest.

These were codified originally in the analyses of Adam Smith, 1776, David Ricardo, 1817, and the later contributions of John Stuart Mill as part of one of the first coherent theories of production in political economy. In economics, land comprises all naturally occurring resources, such as geographical locations, mineral deposits, and even portions of the electromagnetic spectrum. ... Minge. ... A wage is the amount of money paid for some specified quantity of labour. ... Capital has a number of related meanings in economics, finance and accounting. ... =General Means of production generally refers to productive assets which are inputs in a production process. ... In finance, interest has three general definitions. ... Adam Smith Adam Smith (Baptised June 5, 1723 – July 17, 1790) was a Scottish political economist and moral philosopher. ... This article is about the year 1776. ... David Ricardo (April 18, 1772 — September 11, 1823), a British political economist, is often credited with systematizing economics, and was one of the most influential of the classical economists. ... 1817 was a common year starting on Wednesday (see link for calendar). ... John Stuart Mill (May 20, 1806 – May 8, 1873), aka JS Mill, an English philosopher and political economist, was an influential liberal thinker of the 19th century. ... Political economy was the original term for the study of production and the relationships of buying and selling and their relationship to laws, customs and government. ...



In the classical analysis, capital was generally viewed as being physical items such as tools and machinery. With the emergence of the knowledge economy, more modern analysis often distinguishes this physical capital from other forms of capital such as "human capital" (economics jargon for education or training). Emergence is the process of complex pattern formation from simpler rules. ... The Knowledge Economy refers to the use of knowledge to produce economic benefits. ... In general physical capital refers to any non-human asset made by humans and then used in production. ... Human capital is a way of defining and categorizing peoples skills and abilities as used in employment and otherwise contribute to the economy. ...


Also, some economists mention enterprise, entrepreneurship, individual capital or just "leadership" as a fourth factor. However, this seems to be a form of labor or "human capital." When differentiated, the payment for this factor of production is called profit. Entrepreneurship is the practice of starting new organizations, particularly new businesses. ... Individual capital comprises inalienable or personal traits of persons, tied to their bodies and available only through their own free will, such as skill, creativity, enterprise, courage, capacity for moral example, non-communicable wisdom, invention or empathy, non-transferable personal trust and leadership. ... Profit is defined as the residual value gained from business operations. ...


The classical theory, further developed, remains useful to the present day as a basis of microeconomics. Microeconomics is the study of the economic behaviour of individual consumers, firms, and industries and the distribution of production and income among them. ...


Developments and Alternative views

Marxist and socialist economists also employ the concept of factors of production. But they tend to treat labour very differently from the other factors, seeing it as the conscious and active input which converts physical raw materials and other inputs into use-values wanted by consumers and businesses. Their analysis does not substantially alter the idea of factors of production, although it puts special emphasis on means of production, defined as the factors minus labor, which it sought to differentiate from human factors. Further, Marxian political economy differentiates between the transhistorical concepts of the "factors of production" and the role that these play under capitalism: in that socio-economic system, labor becomes " variable capital" seen as the source of surplus-value or profits, while the non-human means of production become "constant capital" which does not contribute to surplus-value except indirectly, by making labor more productive. Karl Marx Karl Marx (May 5, 1818 Trier, Germany – March 14, 1883 London, UK) was an influential German philosopher, political economist, and revolutionary organizer of the International Workingmens Association. ... Socialist Party is the name of several different socialist political parties around the world. ... =General Means of production generally refers to productive assets which are inputs in a production process. ... Marxian economics refers to a body of economic thought stemming from the work of Karl Marx. ... Political economy was the original term for the study of production and the relationships of buying and selling and their relationship to laws, customs and government. ... Capitalism has been defined in various ways (see q:Capitalism). ... Capital has a number of related meanings in economics, finance and accounting. ... Surplus value is a concept created by Karl Marx in his critique of political economy. ... Capital has a number of related meanings in economics, finance and accounting. ...


Others focus on the central role of human capital, in particular the social capital (community trust) and instructional capital (actual worker's skills and instructions) that became increasingly important through the 20th century. Human capital is a way of defining and categorizing peoples skills and abilities as used in employment and otherwise contribute to the economy. ... Social capital refers to the collective value of all social networks and the inclinations that arise from these networks to do things for each other, according to Robert Putnam, author of Bowling Alone and the concepts leading exponent (though not its originator). ... Instructional capital is a term used in educational administration, to reflect capital resulting from investment in producing learning materials. ...


Most modern analyses usually cite four to seven types of capital, as in Natural Capitalism or the theories of intellectual capital. Brands have also been considered "brand capital", a special form of intangible firm-specific social capital distinct from tht inherited from the larger society, in the analysis of Baruch Lev. Natural capitalism is a set of trends and economic reforms to reward energy and material efficiency - and remove professional standards and accounting conventions that prevent such efficiencies. ... Intellectual capital is a term with various definitions in different theories of economics. ... Social capital refers to the collective value of all social networks and the inclinations that arise from these networks to do things for each other, according to Robert Putnam, author of Bowling Alone and the concepts leading exponent (though not its originator). ...


Classical view as the base of microeconomic theory

Although it did not deal substantially with complex issues of a sophisticated modern economy, the classical theory remains useful to the present day as the basis of microeconomics, however many distinctions one cares to make or macro-theory or political economy one chooses to apply to trade them off or set their valuations in society at large. Microeconomics is the study of the economic behaviour of individual consumers, firms, and industries and the distribution of production and income among them. ... Political economy was the original term for the study of production and the relationships of buying and selling and their relationship to laws, customs and government. ...


Land has become natural capital, imitative aspects of Labor have become instructional capital, creative or inspirational aspects or "Enterprise" have become individual capital (in some analyses), and social capital has become increasingly important. The classical relationship of financial capital and infrastructural capital is still recognized as central, but there is a wider debate on means of production and various means of protection, or "property rights", to secure their reliable use. In economics, land comprises all naturally occurring resources, such as geographical locations, mineral deposits, and even portions of the electromagnetic spectrum. ... Natural capital refers to the mineral, plant, and animal formations of the Earths biosphere when viewed as a means of production of oxygen, water filter, erosion preventer, or provider of other natural services. ... Instructional capital is a term used in educational administration, to reflect capital resulting from investment in producing learning materials. ... Individual capital comprises inalienable or personal traits of persons, tied to their bodies and available only through their own free will, such as skill, creativity, enterprise, courage, capacity for moral example, non-communicable wisdom, invention or empathy, non-transferable personal trust and leadership. ... Social capital refers to the collective value of all social networks and the inclinations that arise from these networks to do things for each other, according to Robert Putnam, author of Bowling Alone and the concepts leading exponent (though not its originator). ... Financial capital, or economic capital, is any liquid medium or mechanism that represents wealth, or other styles of capital. ... Infrastructural capital refers to any physical means of production or means of protection beyond that which can be gathered or found directly in nature, i. ... =General Means of production generally refers to productive assets which are inputs in a production process. ... A means of protection is some contract or guarantee of security for body or property. ...


When disputes arise regarding these fine distinctions, most economists will fall back to the three classical factors. While no major theory has yet substantially altered the foundation assumptions of either "left" (Marxist) or "right" (neoclassical) theory, Georgism is one syncretic system of thought incorporating both a nominally socialist moral basis (everyone has an equal right of access to nature) while strictly maintaining a solid "libertarian" philosophy on the absolute right of private ownership of the products of all human labor. Georgism, named after Henry George (1839-1897), is a philosophy and economic theory that follows from the belief that although everyone owns what they create, land, and everything else supplied by nature, belongs equally to all humanity. ...


See also

List of Marketing Topics List of Management Topics
List of Economics Topics List of Accounting Topics
List of Finance Topics List of Economists

  Results from FactBites:
 
Economics - Wikipedia, the free encyclopedia (4651 words)
Economics is said to be normative when it recommends one choice over another, or when a subjective value judgement is made.
Economics, which focuses on measurable variables, is broadly divided into two main branches: microeconomics, which deals with individual agents, such as households and businesses, and macroeconomics, which considers the economy as a whole, in which case it considers aggregate supply and demand for money, capital and commodities.
An outgrowth of neo-classical economics is rational expectations, which differs from neo-classical economics in that it does not see a micro-economic foundation for macro-economic behavior, and it emphasizes the strategies of rational economic actors in creating macro-effects.
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