Production is a rather complicated process, which depends on numerous factors. To draw up a simplified model in the economy, however, it is customary to single out four main factors, without which production is not possible in principle in modern conditions. In this case, one should not confuse the economic factors of production and the so-called harmful and dangerous factors of production , which include: dust, bright light, hazardous gases, etc. From an economic point of view, a factor is a structural element, determined by the role that it plays in the production process.
Analyzing all the existing factors of production in the economy, namely: labor, land, capital and the entrepreneurial factor, it is impossible not to note that the most important among them is human labor. In the old days, when machines did not exist in principle, labor, in fact, was the only factor, and it was labor that determined the value of one or another good. However, today the role of man in the production process, due to the automation of production, is significantly reduced. On the other hand, the same machines are produced with the direct participation of a person who, in addition, serves them and organizes the accounting and sale of production products. Thus, the role of labor remains high, and we are still far from the era in which machines will cope with all human obligations.
Moreover, production equipment itself is not included in production factors in the economy. Since the equipment is purchased for money, it can be combined with raw materials and materials, patents, etc. In general, everything that is bought for money, and necessary for the implementation of the production process itself, is determined by such a factor as capital. Capital also refers to cash investments that must be made so that people can work in production and add value. The role of capital remains controversial, as proponents of leftist political ideas insist that capital is nothing but labor taken from workers using the profit mechanism.
Capital should not be confused with a factor such as land. Features of the demand for factors of production: labor and capital, similar to the market pricing mechanism , do not work in relation to land. Earth is called everything that belongs to nature. Thus, nature, which provides us with an area for production and mineral resources, also takes an active part in the production cycle. The main feature of this factor is that it exists to a limited extent, therefore, with the help of market mechanisms, people must determine for what needs the natural heritage should be used.
And finally, the entrepreneurial factor included in the factors of production in the economy last determines the role in the production process of businessmen who are willing to take risks and are able to organize the process itself. The entrepreneurial factor is intended to explain the superprofits existing in capitalism, i.e. profits in excess of the normal payment for capital. The high profit of the enterprise is considered reasonable, since this, in the opinion of proponents of market capitalism, is the merit of the entrepreneur, who was able to either effectively organize the process, or who took on significant risk. However, this factor is not recognized by all economists today.
Some economists, by contrast, tend to further expand production factors in the economy and include time, idea, etc. Thus, the question of factors is still very controversial, and its interpretation, in many respects, depends on political views.