Resource Quantity

Labor: Labor--human effort--is involved in virtually every act of production, from mining manganese to baking bread. As such, if the economy has more workers, then it can produce more goods. The quantity of labor is typically expanded in three ways:

• The first is natural population growth. Because labor is people, more births today, mean more workers in 20 years. So long as the birth rate exceeds the death rate, the size of the population increases. Once these people reach working age, then the labor force also expands.


• Immigration from other nations is a second way. Workers who move from one country to another immediately add to the labor force of the destination nation. Industrialized countries, such as the United States, have always relied on the immigration of workers from other nations to expand the quantity of labor.


• The third way is an increase in the labor force participation rate. That is, to have a larger fraction of the population engaged in working. Every society has hunters and gathers who work, and couch potatoes who do not. The pool of labor increases when a larger fraction of the population is willing and able to work.

Capital: The factories, machinery, equipment and other capital goods that workers use to assist their production efforts are critical to economic growth. Capital must be produced using resources that could have been used to make something else--such as a want-or-need satisfying hot fudge sundae. This act of producing capital, which enables greater future production but which means giving up goods that would have provided current satisfaction, is commonly termed investment.

Natural Resources: Natural resources provide the economy with the materials that are transformed into goods. If the economy has more materials, then it can produce goods. Because natural resources are natural, that is, they come with the planet, the key to increasing their quantity is not creating more so much as just finding them. This is the basic act of exploration, which has historically included "discovering" new lands like European explorers did in the 1600s or like U.S. settlers did when they expanded westward in the 1800s. However, in modern times, exploration usually takes the form of digging or drilling into the Earth's crust in search of mineral or fossil fuel deposits.

Resource Quality

Education: The Quality of Labor: Education is the primary method of increasing the quality of labor resources. This also goes by the term human capital. Better educated workers are more productive workers. Education can be of the formal, sitting-in-a-classroom variety that awards diplomas and forces students to expand their conceptual understanding. Or it can be of the informal, on-the-job-training variety that comes from experience and learning-by-doing. Both methods--formal education and experience--are valuable methods of increasing human capital and the quality of labor. Some knowledge is best acquired through formal education and some is best obtained by just doing it.