It is intended to represent the contribution to production of nonhuman resources as found in their original, unimproved form.įor the French physiocrats led by Francois Quesnay in the 1750s and 1760s, land was the only factor yielding a reliable gain to its owner. This category sometimes extends over all natural resources. ![]() One intuitive basis for the classification of the factors of production is the manner of payment for their services: rent for land, wages for labor, interest for capital, and profit for entrepreneurship. A major conceptual application is in the theory of production functions. These include models purporting to explain growth, value, choice of production method, income distribution, and social classes. ![]() The factor concept is used to construct models illustrating general features of the economic process without getting caught up in inessential details. Entrepreneurship is a fairly recent addition. Before the twentieth century, only three factors making up the classical triad were recognized: land, labor, and capital. However, economists seek to classify all inputs into a few broad categories, so standard usage refers to the categories themselves as factors. Of course, in a literal sense anything contributing to the productive process is a factor of production. Their needs are mind boggling.Land, labor, capital, and entrepreneurship: These are four generally recognized factors of production. However, if your time is limited, do go to the Amazon proposal form. Then, for more of an academic perspective, I recommend this excellent Brookings article on tech networks. But my starting points were WSJ journalist Greg Ip’s “Capital Account” and the Atlantic’s City Lab. My sources and more: Once you start to look, articles on Amazon’s new HQ2 are everywhere. As for physical capital (tools, equipment, buildings), this is just one detail from their proposal’s instructions:īut the most crucial part is the human capital network with the technical knowhow. At 8 million square feet of office space, the land requirement is massive. Our Bottom Line: Land Labor and CapitalĪmazon’s HQ2 is the perfect example of the factors of production they require to produce their services. It wants locations “with the potential to attract and retain strong technical talent.” And they could need 8 million square feet of office space. The jobs? Primarily in management, software development, and finance.Īmazon also notes that it prefers a metropolitan area with more than one million people. In eight pages of instructions, Amazon says it could create (a whopping) 50,000 full time jobs. All have to arrive in Seattle by October 19. Rather precise, the process requires mailing five hard copies and submitting one electronically. The result? “Strong regions get stronger.”Īnd, for a slightly different list of the top metropolitan areas with tech jobs: Amazon’s RequisitesĪmazon has asked for cities and regional economic development organizations to submit proposals. cities where the people with technology converge. And that takes them to just a handful of U.S. Meanwhile, the firms that employ a well-educated pool of highly paid workers will gravitate to wherever they are located. The divergent part relates to the have-nots, to the cities without the knowhow that Amazon needs. That same economist, Enrico Moretti, tells us that technology is divergent and convergent. Amazon surely wants somewhere that, as one economist said, “Being around smart people makes us even smarter…” That could mean a nearby university and the people who innovate, who design software, who think about what not yet exists. We can assume that Amazon needs a techie location.Īs a place where Amazon will generate ideas, its second home requires a knowledgeable labor force. As the origin of Seattle’s tech network, Microsoft attracted firms like Amazon.Īnd now, with Amazon announcing plans for an HQ2, the question is where? Tech Cities Similar to Silicon Valley, a declining Seattle reinvented itself after Bill Gates, Paul Allen, and Microsoft arrived. Although Shockley Semiconductor failed, its employees created a local diaspora of techies. ![]() According to a Wired article, William Shockley is the reason that Silicon Valley grows chips instead of apricots. Our story starts with one of the transistor’s inventors.
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