factors of production

*noun*; term coined by Adam Smith (1723-1790) to refer to things used to produce other things. Usually people refer to four factors of production: 1.labor (not the same thing as workers); a worker can work more or less hours per week, and can exchange her labor for payment 2. capital; includes tools, machinery, plants and fixtures, seed corn, etc. Adam Smith distinguished between inventories, which he called circulating capital, and tools, which he called fixed capital; 3. land; understood as a specific area on the earth's surface, but sometimes incorporates the natural productivity or mineral resources as well; 4. entrepreneurship; sometimes lumped with capital. Includes the combination of skills required to start a business.