Factors of production are resources that are believed to be the building blocks of production in any economy. Land, labor and capital are widely considered to be the three main factors of production. Factors of production are considered basic inputs that are absolutely necessary for the production of any good or service that is useful to final consumers. Take the case of something as simple as a hamburger. The production of hamburgers requires real estate and raw materials (land), the efforts of multiple workers (labor), and culinary equipment (capital). In fact, such a mix of land, labor, and capital can be seen at various stages in the production process of any good in the modern economy. More recently, entrepreneurship is also considered by many to be the fourth factor of production. It is believed to be the most crucial factor of production that brings together the other three factors. In fact, many believe that other factors of production would be useless without entrepreneurship.
However, some heterodox economists consider land, labor and time to be the three main factors of production. They believe that capital and entrepreneurship are secondary factors of production in the sense that these factors are derived from the first combination of land, labor, and time. In the modern economy, physical capital, like machines for example, is produced by first mixing land and labor over a certain period of time. Only after this happens do we see capital come to life and be used to produce other intermediate or final goods and services. Similarly, these economists argue, entrepreneurship that involves an element of uncertainty can also be seen as the product of mixing the three primary factors of production, namely land, labor, and time. Remember that the role of the entrepreneur involves dealing with the uncertainties that muddy the production process. This element of uncertainty is staged by time, which is necessarily involved in the production of any good or service. Some individuals or groups of entrepreneurs often take the risk of investing money in the present moment and then expect to reap the benefits of the investment at some point in the uncertain future. The ideas of an entrepreneur can also be seen primarily as a way of working. And real estate and other materials that the employer personally uses for work can be classified as land.
Private or public property
The ownership of the factors of production has been a subject of intense debate among thinkers belonging to different schools of economic thought for many centuries. Marxist economists, for example, have long argued that the factors of production should be the collective property of the state. This was the philosophy that drove centrally planned economies, such as the former Soviet Union, in contrast to economies like the United States, where the factors of production are largely owned by individuals or private groups. Marxists believe that private ownership of the factors of production leads to the exploitation of the labor provided by the working class and the mismanagement of scarce resources. They argue that outdated planners, on the other hand, can overcome both problems by framing a proper collective economic plan. Economists of various free-market schools of thought, however, strongly believe in private ownership of all factors of production in an economy. They argue that private property offers resource owners the incentive to use factors of production in the most efficient way, both in terms of avoiding unnecessary waste and extracting maximum value from limited resources.