The new factors of production
Land, labour, capital, we were told. They say these are the things an entrepreneur needs to get together in different combinations, in order to produce. But looking at it again, they sound rather primitive, because production is viewed as something like factory production… of tangibles. Luckily we have evolved into more curious souls and scholars […]
Land, labour, capital, we were told. They say these are the things an entrepreneur needs to get together in different combinations, in order to produce. But looking at it again, they sound rather primitive, because production is viewed as something like factory production… of tangibles. Luckily we have evolved into more curious souls and scholars are now asking whether it is every ‘production’ that requires land, labour and capital, and whether production must result in tangible things as organized by the entrepreneur. Majority of physical production today has not evolved along those lines, as land, labour, and even capital has not grown in proportion with levels of production – which has taken on supersonic proportions. Something else must therefore be responsible for the ability of entrepreneurs and other producers of value, to be able to keep up to pace in a world yearning for more. Like science and technology, economics too has evolved as a subject and it is important to take notice of these developments.
A lot is happening daily, and if we look at the business activities engaged in by some of the largest companies in the world, there are certainly other factors to consider, either in getting production and productivity going, or in boosting such to limits never before imagined. Companies like Google provide information at the touch of a button, creating limitless value to billions of people around the world, and unleashing productivity and production in diverse places, by supplying information and how-tos, to people around the world. Google has little to do with land, labour or capital… maybe a bit of entrepreneurship. Facebook connects people with ideas, and increases the frequency at which information is shared among people. A lot of productivity and production is engendered by the network effect. Even car manufacturers like General Motors, Toyota, Ford and of late those from China, India and South Korea, depend on a whole lot more to produce, than land, labour, capital with some entrepreneurship controlling them all.
What are these things that we seem to be missing? Should we not be refining and enriching this subject and so documenting what really matters?
I went in search of ‘new factors of production’ on the internet, and came off with little. One person wrote eloquently about how ‘data’ is THE new factor of production but reading through, it was obvious that this person was merely working to the answer. As a data person, he tried to weave the entire subject around data. That, to me, is not the way to do analysis. One’s mind should roam free in order to do a good job of this. I would admit that data is important as one of the new factors of production but that is not enough. The car manufacturers do not combine data to land, labour and capital in order to produce. What about technology? Where in the spectrum of land, labour, capital or entrepreneurship can we stick technology as a factor? Yet technology is certainly doing more for production than some of these legacy factors of production.
We should be thinking of the production and productivity process as a whole. In the time the world agreed that land, labour, capital and entrepreneurship were the factors of production, innovation and technology were not so rife as to almost render some of the solid factors irrelevant. For example, today, innovation and technology has rendered billions around the world jobless. Smart people have come up with clever ideas that make production easier, such that as against what happened in the Industrial Age, where many people were employed by factories, producing goods – and services – for many people, what we have now, is a situation where fewer and fewer people are producing for the majority. And that majority – the world population – is increasing. At some point, Instagram had 55 staff, servicing 350million people, and Whatsapp 13 staff, serving over 500million! That is the way of the world. Where are those who talk of turning economies around through factory jobs? They belong in the realm of dinosaurs. If you want jobs for 180million Nigerians you better think harder!
Ergo the thinking has to change. What factors now really matter? What have we omitted? What is wielding more impact than ever before? These are the questions that come to mind. But before then, I must note that unfortunately, it seems that this received wisdom has not been adequately challenged in the academia. It ought to. The definition of factors of production is definitely for a long-forgotten era. Another thing we need to have in mind is the speed, ease and relative costlessness with which capital is replacing labor via the acquisition of technology. Why acquire labour that will have to join unions, fall sick, get married, have children and so on, when one can simply acquire an emotionless machine to do the same work better, with capital (money)? And that is what the smart capitalists of the world have done, thereby meeting the needs of billions around the world – at a profit – while countries like Nigeria deceive themselves that the old order still persists where labour and capital are on the same pedestal. No way!
So I think we should consider the importance of the factors below to the production and productivity process:
1. Technology
2. Innovation
3. Knowledge/Learning
4. Intelligence/Aptitude
5. Talent/Creativity
6. Information/Data
There may be more, but in my thinking, these ones are hard to get rid off when considering real factors of production that matter today. And the interesting fact is that those who own some of these new factors can make money or produce value (be productive) from them without waiting for land, labour, capital or entrepreneurship. INFORMATION for now, is money. You can sell it and make money and produce value. The world is now talking of Big Data, which can be mined for value by people who create the TECHNOLOGY to so do. The world is now selling data. TECHNOLOGY, as noted above, has changed and continues to change the game. It is the cutting edge that sets many companies apart from the motley crowd. Technology has reached into almost everyone’s bedrooms in every corner of the world, extracting and giving value, via the internet for example – when people buy things they need for production via Amazon, Ebay or other shopping platforms.
TALENT/CREATIVITY now runs the world. Think of Nigeria’s music industry. Yes, capital can make you ‘blow’, but talent can at least generate you value, and talent will have to sustain you in the business, not capital. A talented musician can start busking at the corner of the street and earn value. INTELLIGENCE (whether that which is defined by structured collation of knowledge, or mere aptitude, is priceless and is what countries like the USA uses to ‘trump’ the world (no reference to their new president, just the literal meaning of the word, trump). KNOWLEDGE acquired is what a mechanic feeds on, and is what is now almost freely available on e-platforms these days. But knowledge too, is serious money. Professor Igbimi of Obafemi Awolowo University has done serious work on the value of learning (knowledge) in transforming societies, but a country like Nigeria doesn’t recognize its thinkers…. We revere those who steal money and flaunt it instead. And we revere liars and conmen who wear sharp suits.
Knowledge is akin to learning, and is different from labour. The labour referred to in the legacy definition is mostly unskilled labour. Knowledgeable labour is what shows up and changes every game. Learning enables that kind of knowledge. Humans have continued to acquire this required knowledge, thus becoming even more productive on the job. There is a need to make these distinctions.