Labor and Capital

At various points in my schooling, I was taught that the factors of production are land, labor, and capital, and later, land, labor, capital, and entrepreneurship.

I now realize there is only labor and capital. Land is a form of capital and entrepreneurship is a form of labor.

We are all born with the ability to perform labor. I can show up at a job site and perform labor, but I'm just a guy. If I work, and consume less than I produce (i.e., I save), then eventually I can buy a hammer. Now, I'm a guy with a hammer, and hopefully I can earn a higher wage. If I continue to save (which should be easier at the higher wage), I will eventually be able to buy a saw. Now, I'm a guy with a hammer and a saw. These tools (capital) help to leverage my labor to make me more productive and therefore able to command a higher wage.

Of course, hammers and saws are not the only tools. Some other tools are education, relationships, experience, and character. Some tools that are quite valuable do not require much money to acquire.