Entrepreneurship is the undertaking of new business ventures that may eventually become profitable companies. Some economists identify entrepreneurship as a factor of production because it can increase the productive effici🐻ency of a firmꦏ.

Several definitions of entrepreneurs and entrepreneurship exist. Entrepreneurship is neither land, labor, or capital but most place entrepreneurs in the same critical category as more consistently identified 澳洲幸运5开奖号码历史查询:factors of production.

Factors of Production

Factors o꧒f production are the inputs necessary for the creation of a good or service.

Some economists define an entrepreneur as someone who goes about and utilizes these factors for profit: land, labor, and capital. Other definitions consider entrepreneurship in a more abstract ꦐway, however. Entrepreneurs identify new opportunities among the other factors without necessarily controlling them. This implies that entrepreneurship itself is a factor of production.

澳洲幸运5开奖号码历史查询:Disruptive innovations are the result of human insight ༒so it's not entirely clear that entrepreneurship should be considered a separate factor of production from labor. Economists disagree about whether entrepreneurs are different from laborers, are a subset of laborers, or whether they can be both simultaneously.

Risk and the Entrepreneur

One of the least developed aspects of mainstream microeconomics is the theory of the entrepreneur. The 18th-century economist Richard Cantillon called entrepreneurs a "special, risk-bearing group of people." Risk-bearing has been an important characteristic of the economic entrepreneur since that time.

Later economists such as Jean-Baptiste Say and Frank Knight believed that 澳洲幸运5开奖号码历史查询:market risk was the crucial element of the entrepreneur. It wasn't until the middle of the 20th century that Joseph Schumpeter and Israel Kirzner independently developed comprehe🎶nsive applications of risk-bearing in a productive framework.

Schumpeter noted that the other factors of production required a coordinating mechanism to be economically useful. He also believed that profits and interest only exist in a dynamic setting where there is economic development. Development takes place when creative individuals come up with new combinations of the factors of production, according to Schumpeter. He argued that entrepreneurs create dynamism and growth.

Value and Returns

Some economists define the factors of production as 澳洲幸运5开奖号码历史查询:inputs that generate value and receive returns. Labor generates value and receives wages as pay🔯ment for work. Capital receives interest as payment for its use. Land receives rent as payment for its use. It is the entrepreneur who receives profit according to this the𓄧ory.

It differentiates between the laborer and the entrepreneur based on the type of return. There are some important challenges to this view. Do entrepreneurs receive profit commensurate with their 澳洲幸运5开奖号码历史查询:marginal revenue product? Is there a definable mark꧂et for entrepreneurship that corresponds to its returns and corresponds with an upward-sloping supply curve?🌸

Entrepreneurs and Asset Ownership

These issues beg another question: Does an entrepreneur necessarily need access to economic assets? Some economists say no, that it's only the ideas that matter. This is sometimes known as the "pure" entrepreneur. Entrepreneurial acts are non-marginal and purely intellectual according to this theory.

This view assume☂s that entrepreneurship is embodied in the creation and operation of a ﷽firm and the deployment of other factors.

Austrian economist Peter Klein says that entrepreneurship can't be treated as a factor of production if it's treated as a process or attribute rather than an employment category. Normal factors of production can be depreciated during times of economic struggle. This doesn't apply to attributes, however.

The Bottom Line

The theory behind factors of production is that everything that’s invested in a company must produce some form of economic activity. These factors are generally considered to be capital, labor, or land. They don't necessarily include the creativity and brain power of an individual who is an integral part of the company, typically its owner or founder. This individual might be the brainchild of a new, innovative product that launches the business to untold levels of success.

An argument exists as to whether an entrepreneur is a factor of production because they’re not capital or land. Others contend that they sho🦩uld be considered a separate factor of production from labor.