Production

Man must rearrange various elements of his environment to eventually produce a desired end - a good. This is called production.

For example, man decides to satisfy the want for a ham sandwich, and proceeds to act upon his judgment of the meth­ods by which a ham sandwich can be assembled. The consumers good is the ham sandwich when it is eaten. It is obvious that there is a scarcity of this consumers’ good as there is for all direct means (bread, ham, time, etc.); otherwise it would always be available, like air, and would not be the object of action.

Factors of Production

To produce a ham sandwich for the man in his armchair, it is necessary for his wife to expend energy in unwrapping the bread, slicing the ham, placing the ham be­tween bread slices, and carrying it to Jones. All this work may be called the labor of the housewife. The co-operating factors that are directly necessary to arrive at the consumers’ good are, then: the housewife’s labor, bread in the kitchen, ham in the kitchen, and a knife to slice the ham. Also needed is the land on which to have room to live and carry on these activities. Furthermore, this process must, of course, take time, which is another indispensable co-operating factor. The above factors may be called first-order producers' goods, since, in this case, these co-operate in the production of the consumers' good. Many of the first-order producers’ goods, however, are also unavailable in nature and must be pro­duced themselves, with the help of other producers' goods. Thus, bread in the kitchen must be produced with the co-operation of the following factors: bread-in-shop and housewife's labor in carrying it (plus the ever-present land-as-standing-room, and time). In this procedure, these factors are second-order producers' goods, since they co-operate in producing first-order goods. Higher­-order factors are those co-operating in the production of factors of lower order.

Production may be therefore analyzed as occurring in different stages. In the earlier or "higher" stages, producers' goods must be produced that will later co-operate in producing other producers' goods that will finally co-operate in producing the desired consumers' good. In a developed economy, the structure of production of a given consumers' good might be very complex and involve numerous stages.

Conclusions:

• each stage of production takes Time
• there are two classes of factors of production:
  • those produced with the aid of other factors in later or "lower" stages of production, termed Capital Goods
  • those that are found already available in nature:
    • the expenditure of human energy, called Labor
    • the nonhuman elements provided by nature, called Nature or Land

Production and Creation

Production is not an act of creation; it does not bring about something that did not exist before. It is a transformation of given elements through arrangement and combination. The producer is not a creator. Man is creative only in thinking and in the realm of imagination. In the world of external phenomena he is only a transformer. All that he can accomplish is to combine the means available in such a way that according to the laws of nature the result aimed at is bound to emerge.

Production is not something physical, material, and external; it is a spiritual and intellectual phenomenon. Its essential requisites are not human labor and external natural forces and things, but the decision of the mind to use [p. 142] these factors as means for the attainment of ends. What produces the product are not toil and trouble in themselves, but the fact that the toiling is guided by reason. The human mind alone has the power to remove uneasiness.