The factors of production, which in the United States are controlled by individuals, fall into four major categories: natural resources, labor, capital, and entrepreneurship.
Natural Resources: Natural resources, which come directly from the land, air, and sea, can satisfy people’s wants directly (for example, beautiful mountain scenery or a clear lake used for fishing and swimming), or they can be used to produce goods and services that satisfy wants (such as a forest used to make lumber and furniture).
The United States has many natural resources. They include vast areas of fertile land for growing crops, extensive coastlines with many natural harbors, and several large navigable rivers and lakes on which large ships and barges carry products to and from most regions of the nation. The United States has a generally moderate climate, and an incredible diversity of landscapes, plants, and wildlife.
Labor: Labor refers to the routine work that people do in their jobs, whether it is performing manual labor, managing employees, or providing skilled professional services. Manual labor usually refers to physical work that requires little formal education or training, such as shoveling dirt or moving furniture. Managers include those who supervise other workers. Examples of skilled professionals include doctors, lawyers, and dentists.
Of the 270 million people living in the United States in 1998, nearly 138 million adults were working or actively looking for work. This is the nation's labor force, which includes those who work for wages and salaries and those who file government tax forms for income earned through self-employment. It does not include homemakers or others who perform unpaid labor in the home, such as raising, caring for, and educating children; preparing meals and maintaining the home; and caring for family members who are ill. Nor, of course, does it count those who do not report income to avoid paying taxes, in some cases because their work involves illegal activities.
Capital: Capital includes buildings, equipment, and other intermediate products that businesses use to make other goods or services. For example, an automobile company builds factories and buys machines to stamp out parts for cars; those buildings and machines are capital. The value of capital goods being used by private businesses in the United States in the late 1990s is estimated to be more than $11 trillion. Roughly half of that is equipment and the other half buildings or other structures. Businesses have additional capital investments in their inventories of finished products, raw materials, and partially completed goods.
Entrepreneurship: Entrepreneurship is an ability some people have to accept risks and combine factors of production in order to produce goods and services. Entrepreneurs organize the various components necessary to operate a business. They raise the necessary financial backing, acquire a physical site for the business, assemble a team of workers, and manage the overall operation of the enterprise. They accept the risk of losing the money they spend on the business in the hope that eventually they will earn a profit. If the business is successful, they receive all or some share of the profits. If the business fails, they bear some or all of the losses.
Many people mistakenly believe that anyone who manages a large company is an entrepreneur. However, many managers at large companies simply carry out decisions made by higher-ranking executives. These managers are not entrepreneurs because they do not have final control over the company and they do not make decisions that involve risking the companies resources. On the other hand, many of the nation’s entrepreneurs run small businesses, including restaurants, convenience stores, and farms. These individuals are true entrepreneurs, because entrepreneurship involves not merely the organization and management of a business, but also an individual’s willingness to accept risks in order to make a profit.
Throughout its history, the United States has had many notable entrepreneurs, including 18th-century statesman, inventor, and publisher Benjamin Franklin, and early-20th-century figures such as inventor Thomas Edison and automobile producer Henry Ford. More recently, internationally recognized leaders have emerged in a number of fields: Bill Gates of Microsoft Corporation and Steve Jobs of Apple Computer in the computer industry; Sam Walton of Wal-Mart in retail sales; Herb Kelleher and Rollin King of Southwest Airlines in the commercial airline business; Ray Kroc of MacDonald’s, Harland Sanders of Kentucky Fried Chicken (KFC), and Dave Thomas of Wendy’s in fast food; and in motion pictures, Michael Eisner of the Walt Disney Company as well as a number of entrepreneurs at smaller independent production studios that developed during the 1980s and 1990s.
Natural Resources: Natural resources, which come directly from the land, air, and sea, can satisfy people’s wants directly (for example, beautiful mountain scenery or a clear lake used for fishing and swimming), or they can be used to produce goods and services that satisfy wants (such as a forest used to make lumber and furniture).
The United States has many natural resources. They include vast areas of fertile land for growing crops, extensive coastlines with many natural harbors, and several large navigable rivers and lakes on which large ships and barges carry products to and from most regions of the nation. The United States has a generally moderate climate, and an incredible diversity of landscapes, plants, and wildlife.
Labor: Labor refers to the routine work that people do in their jobs, whether it is performing manual labor, managing employees, or providing skilled professional services. Manual labor usually refers to physical work that requires little formal education or training, such as shoveling dirt or moving furniture. Managers include those who supervise other workers. Examples of skilled professionals include doctors, lawyers, and dentists.
Of the 270 million people living in the United States in 1998, nearly 138 million adults were working or actively looking for work. This is the nation's labor force, which includes those who work for wages and salaries and those who file government tax forms for income earned through self-employment. It does not include homemakers or others who perform unpaid labor in the home, such as raising, caring for, and educating children; preparing meals and maintaining the home; and caring for family members who are ill. Nor, of course, does it count those who do not report income to avoid paying taxes, in some cases because their work involves illegal activities.
Capital: Capital includes buildings, equipment, and other intermediate products that businesses use to make other goods or services. For example, an automobile company builds factories and buys machines to stamp out parts for cars; those buildings and machines are capital. The value of capital goods being used by private businesses in the United States in the late 1990s is estimated to be more than $11 trillion. Roughly half of that is equipment and the other half buildings or other structures. Businesses have additional capital investments in their inventories of finished products, raw materials, and partially completed goods.
Entrepreneurship: Entrepreneurship is an ability some people have to accept risks and combine factors of production in order to produce goods and services. Entrepreneurs organize the various components necessary to operate a business. They raise the necessary financial backing, acquire a physical site for the business, assemble a team of workers, and manage the overall operation of the enterprise. They accept the risk of losing the money they spend on the business in the hope that eventually they will earn a profit. If the business is successful, they receive all or some share of the profits. If the business fails, they bear some or all of the losses.
Many people mistakenly believe that anyone who manages a large company is an entrepreneur. However, many managers at large companies simply carry out decisions made by higher-ranking executives. These managers are not entrepreneurs because they do not have final control over the company and they do not make decisions that involve risking the companies resources. On the other hand, many of the nation’s entrepreneurs run small businesses, including restaurants, convenience stores, and farms. These individuals are true entrepreneurs, because entrepreneurship involves not merely the organization and management of a business, but also an individual’s willingness to accept risks in order to make a profit.
Throughout its history, the United States has had many notable entrepreneurs, including 18th-century statesman, inventor, and publisher Benjamin Franklin, and early-20th-century figures such as inventor Thomas Edison and automobile producer Henry Ford. More recently, internationally recognized leaders have emerged in a number of fields: Bill Gates of Microsoft Corporation and Steve Jobs of Apple Computer in the computer industry; Sam Walton of Wal-Mart in retail sales; Herb Kelleher and Rollin King of Southwest Airlines in the commercial airline business; Ray Kroc of MacDonald’s, Harland Sanders of Kentucky Fried Chicken (KFC), and Dave Thomas of Wendy’s in fast food; and in motion pictures, Michael Eisner of the Walt Disney Company as well as a number of entrepreneurs at smaller independent production studios that developed during the 1980s and 1990s.
