The Role of Production of Material Values

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Man’s conscious labour and his first tools marked the beginning of the establishment of human society. Human beings embarked upon an entirely new way of life, unlike the life led by animals. Animals can only make use of those benefits which nature provides for them. Labour freed man from this complete dependence upon nature.

With the aid of his new tools man was able to get benefits from nature that were formerly inaccessible to him. He was also able to change these natural benefits and to make them more useful to himself. Tools of stone and wood made it possible for primitive man to considerably extend his use of material values.

Man began to kill large, strong animals and thus added quantities of nourishing meat products to his diet. He learned to work the skins of animals and used them to protect his bode from the cold. Man also used his tools to build shelters. It was the production of material values that became the basis of life in human society.

As production developed man increased his active influence n nature. He found that he could satisfy his needs more readily through the material values he himself created.

The production of material values is not stationary; it grows, develops and is perfected constantly. In order to exist mankind must constantly produce material values in ever-increasing quantities.

The development of production is an objective necessity, independent of the will and desire of people. It is a law of social existence. (1258 t.un.)

Factors of Production

The resources that go into the creation of goods and services are called the factors of production. The factors of production include natural resources, human resources, capital and entrepreneurship. Each factor of production has a place in our economic system, and each has a particular function. People who own or use a factor of production are entitled to a “return or reward”. This generates income which, as it is spent, becomes a kind of fuel that drives the economy.

Natural resources or land. Natural resources are the things provided by nature that go into the creation of goods and services. They include such things as mineral, wildlife and timber resources, as well as the air we breathe. Economists also use the term “land” when they speak of natural resources as a factor of production.

The price paid for the use of land is called rent. Rent becomes income to the owner of the land.

Human resources or labour. Economists call the physical and mental effort that people put into the creation of goods and services labour.

The price paid for the use of labour is called wages. Wages represent income to workers, who own their labour.

Capital. To the economist, physical capital (or “capital” as it is commonly called) is something created by people to produce other goods and services. A factory, tools and machines are capital resources because they can be used to produce other goods and services. So too is the truck that delivers gasoline to the local service station. The term “capital” is often used by business people to refer to money they can use to buy factories, machinery and other similar productive resources.

Payment for the use of someone else’s money, or capital, is called interest.

Entrepreneurship. Closely associated with labour is the concept of entrepreneurship, the managerial or organizational skills needed by most firms to produce goods and services. The entrepreneur brings together the other three factors of production. When they are successful, entrepreneurs earn profits. When they are not successful, they suffer losses.

The reward to entrepreneurs for the risks, innovative ideas and efforts that they have put into the business are profits, whatever remains after the owners of land, labour and capital have received their payments. (1930 t.un.)

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