People think economics is about dollars and sense. Er, cents. And it is (on both counts).
But economic choices involve more than just money. Money, or income, is just one of several scarce or limited resources we have to decide how to use wisely. Time is also a resource that we must choose how to spend.
Economists traditionally also identify several factors of production that must be constantly prioritized and allocated. Traditionally, these factors of production are identified as land, capital, and labor. Economists define land as all natural resources. Trees, game animals, water, minerals—these are all included in the economic concept of land. Capital includes types of property, such as machinery and tools, that can be used to produce things. It does not include money. Labor refers to the human input invested in the production process; it is the human effort exerted when a lumberjack uses a chainsaw (capital) to cut down a tree (land).
Many economists also identify a fourth factor of production: technology. Technology refers not just to robots and computers but to the entire body of knowledge or science that informs or improves a production process.
And finally, some economists also include entrepreneurship as a factor of production. Like labor, entrepreneurship is a human input factor but it refers to more than just work; it refers to the creativity and initiative needed to start a business, develop new goods and services, or improve on the development and distribution of existing products.
|Year||Total U.S. Coal Production||Total U.S. Coal Miner Employment||Annual Production Per Miner|
All societies possess a set of resources that can be placed in these categories. But since the first rule of economics tells us that all resources are limited, societies cannot produce all of the goods and services that these resources could be combined to produce. Choices must be made, trade-offs must be accepted, and opportunity costs must be paid.
Why It Matters Today
When you start working, you will become a factor of production: labor. (And hopefully later in life, once you've built up some bank, you can become capital, too.)
But in your laboring days, you'll want to make sure not to choose a job that is going to be made obsolete by technology. There's not much need anymore for telegraph operators or horse-and-buggy drivers; the telephone and automobile did those jobs in.
A few jobs that are likely to go down as the horse-and-buggy drivers of the 21st century, probably sooner than later:
Remember, choose rationally! That's what economics is all about...
Technology has fundamentally changed how we live. “I want my MTV”…and my refrigerator, color tv, and microwave oven.