I will want to also add a few more phenomena to inform a new thinking around ‘Factors of Production’, and by extension, to help power up productivity, especially in Nigeria and Africa. This is because it helps greatly to have a theoretical underpinning for our efforts so that we aren’t just working blindly. Let us know which of our efforts are productive, and which phenomena around us are useful. This will also inform better conceptualisation and measurement of larger macro numbers, like the National Output (GDP).
I think it is a good time to repeat this hypothesis I put forward a long time ago, in terms of having a rethink about what is known in the field of Economics as Factors of Production. The idea is that several centuries ago, leaders of thought ruminated about what was needed to produce goods. In Adam Smith’s contemplation of what makes up the wealth of nations, he had to think fundamentally about the broad swathe of efforts and elements through which nations become great, formidable, and progressive. In the same vein, he and some of the earlier economists had to think about what elements needed to be combined to produce goods – the Factors of Production. At that point, they were trying to put together what made one nation progress faster than the other, and they quickly zeroed in on the fact that the ability to create things that others found valuable was fundamental to the flow of resources to individuals, households, companies and nations. David Ricardo and Karl Marx, despite markedly different ideologies, also agreed on this plank with Adam Smith.
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In those days, Europe had shown great evidence of civilisation. The First Industrial Revolution, powered by the steam engine, created a miracle – the mass production of goods for large amounts of people and ships that could sail fairly long distances – and thereby enlarged the powers and reach of the countries that were able to scale productivity through this discovery. Britain was slam bang in the middle of that civilisation, and because there we no laws precluding anyone who could to grab some other people’s lands through colonisation and slavery, Britain was to soon own half of the land on Earth.
And so, because of the stage of productivity and the understanding of Economics and Commerce at that point, the best explanation the world could find for what elements were necessary for production were: Land, Labour, Capital and Entrepreneurship. These four factors have been thought in primary, secondary and tertiary level economics classes for too long. I am hoping that the curriculum is beginning to change now but my research shows that in many institutions, the same thing still persists. Well, what education has taught us is to continue to challenge phenomena. One should never get intimidated from asking questions, because the next frontier of knowledge and understanding is open to any human being to push.
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And so, many moons ago, I questioned that theory and proposed that other important factors of elements be added to the traditional factors of production. Those new elements include Technology, Information, and Knowledge. My theory is that with knowledge, one can produce something – as different from someone without that knowledge. If productivity on a macroeconomic level is viewed from the angle of a nation’s Gross Domestic Product – which measures national output through the goods and services produced in a country in a given year by those who live in that country – certainly, income earned strictly from using one’s knowledge is part of productivity, irrespective of how that knowledge is acquired. What about the now ubiquitous technology? The temptation is to subsume this under Capital as a factor of production.
Neoclassical economists have done that disservice for too long, emphasising the distinction between financial, working and fixed capital. But that would be unfair and erroneous. Because not all elements of technology are a product, subset, or function of capital. Some of the world’s most important technologies were put together by experimenters, adventurers, knowledgeable mavericks, and so on. And it is arguable that today, technology has become even more important than sheer capital. Of course, those with capital have kept deploying what they have (money) to acquire technology to stay ahead. Thomas Pickety documented circa 2011 how Capital is being used to substitute Labour via the acquisition of technology. We couldn’t also possibly subsume Technology under Entrepreneurship, because most innovators are not even entrepreneurs and don’t intend to be.
The same goes for information – which is now almost freely available as a result of the self-same technology. Many billionaires have been made from the fact that they had access to information only. Information is very similar to knowledge, but broader. Someone can be knowledgeable about a specific thing. And millions of people can create value, increase productivity, and make money from any combination of information almost freely available today from the 130 trillion pages available on Google and other platforms, but nobody can navigate the entire spectrum of information available to mankind today via the internet and beyond. In today’s information/Big Data age, we couldn’t even yoke information with knowledge, so I suggest it to be studied separately and admitted as a stand along factor of production that could be combined with others to create value and productivity. Indeed, land, as a factor of production now pales in significance, in comparison with super phenomena such as technology and information/data.
I did a small search for the meaning of factors of production and came up with the following, from Investopedia:
“The factors of production are the inputs used to create goods and services within an economy. Economists typically identify four main factors: land, labor, capital, and entrepreneurship. These factors are the basic building blocks that enable businesses to produce and generate income”.
Another definition from Wichita State University goes:
“Factors of production are the inputs used to produce a good or service in order to produce income. Economists define four factors of production: land, labor, capital and entrepreneurship. These can be considered the building blocks of an economy” (22 December, 2020).
If we looked more intently at the examples given of each of the so-called four factors by the AI model, we will see that it describes the primitive 1800s economy when Smith, Ricardo and Marx lived, not the one of today, transmogrifying at phenomenal speed, where the speed of thought, and indeed artificial intelligence – that cannot be rightfully categorised under land, labour, capital or entrepreneurship without great disservice – are running the world. Time for a rethink.
I even went ahead and asked Gemini AI what factors of production were, and it gave me the below:
The four factors of production are the foundational resources necessary to produce goods and services within an economy. They are the inputs that are combined to create economic output. Economists have traditionally categorized these into four groups: Land, Labor, Capital, and Entrepreneurship.
The Four Factors of Production
Land: This is a broad term that refers to all natural resources used in production. It includes not just the physical ground on which a factory is built, but also all the raw materials that come from nature. The income generated from land is known as rent.
Examples: Forests (for timber), oil, natural gas, minerals, water, and the agricultural land used to grow crops.
Labor: This encompasses all human effort—both physical and mental—that is used to produce goods and services. The quality of labor is often referred to as human capital, which includes a person’s skills, knowledge, and experience. The compensation for labor is called wages.
Examples: A factory worker on an assembly line, a software engineer writing code, a doctor performing surgery, or a teacher in a classroom.
Capital: This refers to the man-made tools, machinery, buildings, and infrastructure used to produce other goods and services. It is important to distinguish this from financial capital (money), which is used to purchase these items but isn’t itself a factor of production. The payment for capital is interest.
Examples: A sewing machine in a tailor’s shop, a tractor on a farm, a delivery truck, or the computers and servers in an office.
Entrepreneurship: This is the human resource that organizes the other three factors of production—land, labor, and capital—to create a new good or service. Entrepreneurs are the risk-takers and innovators who drive economic growth and are compensated with profit.
Examples: The founder of a tech startup, a small business owner who opens a new restaurant, or an inventor who creates a new product and brings it to market.
Of course AI is still ‘garbage in, garbage out’, in that it relies on what has been inputted, plus a little more clever manipulations. But as at today, AI is unable to get past this crude and outdated thinking about such a fundamental economic phenomenon. This should worry us all. If we looked more intently at the examples given of each of the so-called four factors by the AI model, we will see that it describes the primitive 1800s economy when Smith, Ricardo and Marx lived, not the one of today, transmogrifying at phenomenal speed, where the speed of thought, and indeed artificial intelligence – that cannot be rightfully categorised under land, labour, capital or entrepreneurship without great disservice – are running the world. Time for a rethink.
So, I will want to also add a few more phenomena to inform a new thinking around ‘Factors of Production’, and by extension, to help power up productivity, especially in Nigeria and Africa. This is because it helps greatly to have a theoretical underpinning for our efforts so that we aren’t just working blindly. Let us know which of our efforts are productive, and which phenomena around us are useful. This will also inform better conceptualisation and measurement of larger macro numbers, like the National Output (GDP). Those other phenomena, which I believe contribute to productivity and are not currently captured, include:
- Time
- Intelligence
- Energy
Of course, in researching this article, I came across one Prateek Agarwal (2025) whose writeup proposed Technology as a stand-alone factor of production, though in tentative manner. I also saw an old journal article by Robert Kummel (1989), wherein he pushed for the inclusion of Energy as a distinct factor of production – because energy is distinct from Labour and cannot be subsumed under capital (like machines are). Of course it takes human energy to operate machines. For me, intelligence repositories, gathered over time, provide formidable points of reference that can create productivity, or even prevent the loss of productivity in the hands of destructive agents. All of human activities, and even of machines, robots and Artificial Intelligence, also operate with one limiting factor – Time.
Why then has the almighty TIME not been considered as a factor of production? It may look limitless for those who say that humanity started billions of years ago, but for everyone on earth, and indeed any machine or intelligence, time is a limiting factor. Nothing lives forever. No one has all the time on their hands to produce whatever they have in mind. And even intelligence gets outdated by new innovation. But AI should get us thinking of the contribution of INTELLIGENCE as a factor in its own right. See how extremely productive we can all become with AI!
…I am only interested in causing a new consideration of what we know presently as Factors of Production. I can see a copy of University of Queensland, Australia’s Professor John Quiggin’s book, Zombie Economics, which has since categorised the extant thinking among dead ideas that refused to go away – alongside the likes of Ricardo’s Comparative Advantage.
How Economics Lost Its Soul
I conclude this by referencing an interesting article shared by Professor Uche Uwaleke, which also speaks to the fact that somehow, Economics pedagogy has bravely and successfully resisted new ideas. It was written by Jostein Hauge and published 4 August, 2025. Some of the conclusions are instructive, and support my proposal (which will make it into a peer-reviewed journal after proper referencing) for an expanded thinking and re-teaching of production and productivity in Economics.
Professor Hauge believes – and I very much concur – that:
- Economics education does not address historical and contemporary power imbalances. Only 45 per cent of universities ever mention Economic History, or Ethics.
- Mainstream neoclassical economics dominates the economic theories taught. And, 88 per cent of sampled modules are captured by this. And they are quantitatively presented.
- Economics is taught in isolation from other social sciences. Otherwise inextricable disciplines such as Politics, Sociology, Geography, and History, have been de-linked from Economics in universities.
Hauge also quoted Nobel Prize Winner Angus Deaton, who also took umbrage at where the discipline of Economics is today by noting five shortcomings:
- Power: Our emphasis on the virtues of free, competitive markets and exogenous technical change can distract us from the importance of power in setting prices and wages, in choosing the direction of technical change, and in influencing politics to change the rules of the game. Without an analysis of power, it is hard to understand inequality or much else in modern capitalism.
- Philosophy and ethics: In contrast to economists from Adam Smith and Karl Marx through John Maynard Keynes, Friedrich Hayek, and even Milton Friedman, we have largely stopped thinking about ethics and about what constitutes human well-being. We are technocrats who focus on efficiency… We often equate well-being with money or consumption, missing much of what matters to people. In current economic thinking, individuals matter much more than relationships between people in families or in communities.
- Efficiency is important, but we valorize it over other ends. Many subscribe to Lionel Robbins’ definition of economics as the allocation of scarce resources among competing ends or to the stronger version that says that economists should focus on efficiency and leave equity to others, to politicians or administrators. But the others regularly fail to materialize, so that when efficiency comes with upward redistribution—frequently though not inevitably—our recommendations become little more than a license for plunder. Keynes wrote that the problem of economics is to reconcile economic efficiency, social justice, and individual liberty.
- Empirical methods: The credibility revolution in econometrics was an understandable reaction to the identification of causal mechanisms by assertion, often controversial and sometimes incredible. But the currently approved methods, randomized controlled trials, differences in differences, or regression discontinuity designs, have the effect of focusing attention on local effects, and away from potentially important but slow-acting mechanisms that operate with long and variable lags.
- Humility: We are often too sure that we are right. Economics has powerful tools that can provide clear-cut answers, but that require assumptions that are not valid under all circumstances.
Professor Hauge concludes by trying to desensitise the study of Economics from the obsession with quantitatives – the art of looking for X in relation to Y, the capture of the field of economics by scientists and engineers with their infusion of scientific models that try to explain the rather unpredictable decisions of human beings – with many failures to show for that – and a reversion to history, sociology, psychology, politics and geography etc.
For me, I am only interested in causing a new consideration of what we know presently as Factors of Production. I can see a copy of University of Queensland, Australia’s Professor John Quiggin’s book, Zombie Economics, which has since categorised the extant thinking among dead ideas that refused to go away – alongside the likes of Ricardo’s Comparative Advantage.
‘Tope Fasua, an economist, author, blogger, and entrepreneur, can be reached through [email protected].
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