Question

You have learned that there are four factors of production (aka inputs) in the production process: land, labor, capital and entrepreneurship. Chapter 10 deals with land and labor; Chapter 11 deals with capital. Why has entrepreneurship been left out of the picture? Provide an explanation in your own words.

Answer 1

Yes, we have seen that there are four factors of production named as land, labour, capital and entrepreneur. And we can also see that usually in Economics, entreprenuership has been left out of the picture since many many years. But here we can say that land, labour and capital are basically Economical and say, Technical terms but entrepreneurship, yes, also do comes under Economics but is used more in a Business sense. Entrepreneur is the only person who collects and combines the three factors of production, that are, land, labour, capital and entrepreneur in the correct number/proportion and utilises them in a more wise and judicious form in order to establish an idea of producing a good or service into a business. So, we can also say, that Entrepreneurship is a key drive in which an entrepreneur uses his ideas and strategies to form and establish a new business or expand an existing one. And hence, this term ENTREPRENEURSHIP is used more with a business motive, as entrepreneur combines all the three factors of production, land, labour and capital, to add to more stock and suppy of production of goods and services. And hence, the role of an entrepreneur lies in organising, managing, directing and controlling the affairs of a firm or an organization. He is the only risk-bearer and do you know that the Innovation Risk-Takers are the most successful entrepreneurs till date. The more he tries to have new inventions in his technology and techniques/tools/factors of production he uses, the chances are to get more and more rewards, as, for example, we can say that with more new technologies and inventions, an entrepreneur can reduce the cost of production as well (just taking it an example, the case can be vice-versa too). As entrepreneur is the only risk-bearer in a firm or an organization, considering this, he/she is the profit-maker as well. Entrepreneur is also a person who provides rent, wages, and interest to the other three factors of production, land, labour and capital, respectively (payments to factors of production utilised in whatever proportion, according to that he fixes the amount of payments per unit of factor of production utilised). And hence, by simply putting into words, entrepreneur is the only owner of the business. However, now-a-days, there is a separation definitely between a management and ownership. As we can say, that even if entrepreneur is the owner of the business and spots the business opportunities in an economy he can easily exploit, and hence, the risk-bearer and helps in initiating the production by combining other factors of production in a way by utilising them wisely and judiciously in order to avoid losses and the aim is to get higher productivity out of the available resources (even though they are the risk-takers as they are usually of the thought that by taking risks, rewards could be much better than not taking any of the risk), but the daily and routine-life operations are done by the separate department of management, usually, the managers, ofcourse, and hence, takes an appropriate decisions regarding the daily-routine working operations. Hence, Entrepreneurship is a term used more in a business sense and hence, we use it less in Economics, in Economics, we are basically much more focused on the concepts related to 4 central functions, that is, Production, Consumption, Distribution and Exchange. And all these functions are operated with the help and under the view of entrepreneurs.