Is Money An Economic Resource?

Is Money An Economic Resource

Have you ever come across questions like, “is money an economic resource?” It will cause you to question your understanding of money and the factors of production. Land, labor, entrepreneur, and capital are all factors of production. They are an economic resource. So, the big question is:

Is money really an economic resource?

The answer is no! Money isn’t an economic resource. You can say it’s a resource that one needs to purchase supplies that will eventually go into the creation of goods and rendering of services. What we have as factors of production includes land, labor, capital, and entrepreneur. You might also argue that money is required to kick-start a business, which is right. But then, it’s not an economic resource or factor of production. Instead, we use the money to pay laborers or purchase other factors of production. 

So that’s the answer to money being an economic resource. Continue reading for more on this topic.

Why Do People Think Money Is An Economic Resource?

Most people still argue that money is an economic resource. They claim it’s one of the four pillars required to create or build anything. Economics classifies financial resources (money) as a nonhuman resource.

Of course, you need cash to acquire land, hire laborers or workers, and for the day to day running of the business. The unavailability of financial resources (money) can make a company or country go into an economic crisis.

But as I earlier said, money isn’t an economic resource in any way. It’s also not among the factors of production. In economic terms, factors of production refer to inputs used to either create a good or render certain services.

You can use your money to acquire items that are factors of production — for example, machines and tools. You also cannot transform cash into goods or services, can you? I guess not! Let’s look at the meaning of economic resources for a better understanding of why money is nowhere near economic resources.

What Is The Meaning Of An Economic Resource?

I have read about and come across people who argue that money isn’t an economic resource. Most of them refer back to the trade by barter era where cowries, cows, and other items were used as means of payment for items purchased or workers hired.

But that era has passed. Now, what we use as payment is “money.” No one the world over would accept cowries, cows, or other items as means of payment for services rendered or goods supplied. They only recognize money as the sole medium of exchange.

There might be other arrangements to pay for goods or services rendered that don’t include money. For instance, if Mr. A has an interest in Mr. B’s property, but Mr. A only has an expensive car to offer, he can propose such a deal to Mr. B. We can also say trade by barter still exists, but it’s rare and more refined.

Now back to the question, what’s the meaning of economic resources? These refer to factors or things used in rendering services or manufacturing goods. They are simply inputs that an individual can use to create something valuable or render valuable services.

Types Of Economic Resources

For better understand, let’s classify economic resources into different levels. The classification will also enable us to have a better understanding of where money does belong.

Economic resources come divided into nonhuman and human resources. Examples of nonhuman economic resources include financial resources, capital goods, land, and technology.

We also have human resources, which, by definition, indicate that it has something to do with humans. It refers to human efforts required to produce the desired goods or render services. These human resources include management and labor.

Economic resources: Examples and explanations

The four major factors of production popularly thought in schools include land, labor, capital, and entrepreneur. Most of us may have an idea about these factors of production. However, no knowledge is a waste, so let’s revisit each of them.

Here are explanations of the different economic resources (factors of production)

1. Land

When we talk about land, we are merely referring to all the natural resources in it. We aren’t only talking about a piece of land upon which a structure (building) can be established. The natural physical resources we are talking about include silver, gold, oil, nickel, iron, and so on.

Also, these natural resources aren’t evenly distributed across the world. Some countries are super-rich when it comes to these natural resources, which would help in improving their economy to the envy of other countries.

I will also like to make it clear that having an abundance of natural resources doesn’t mean that a country will develop rapidly. There is a plethora of developing and underdeveloped countries with a wealth of natural resources that are not moving forward.

There are also countries with smaller economic resources that have an excellent economy. A clear example is Japan. They have the second biggest economy the world over, even though they rely on oil importation. Most countries also thrive in farming. They have massive farmlands and fertile soil to grow crops. Examples are the United States of America and Canada.

Furthermore, the land is considered a fixed asset. It’s one of the factors of production that’s never used up. The land is also vital to any establishment in that without it, there will be nowhere to install a manufacturing plant, head office, or a known location for the business.

2. Capital

First off, what’s capital? Capital resources are human-made machines or tools used in the production of goods. It could be any piece of equipment, a tool, asset, or a housing facility used over specific periods by a company.

There are also different factors of capital, such as fixed capital, working capital, and capital productivity.

Examples of fixed capital include new buildings, technologies, machinery, factories, and other useful equipment.

On the other hand, working capital refers to a pile of semi-finished, finished goods or components that will be used in the nearest future.

Finally, we have capital productivity. It involves new features of technology, machinery, or capital building that can make workers more productive.

3. Labor

Labor refers to human input concerning the manufacturing process. Irrespective of how advanced technology-wise the world becomes or the number of advanced toys (AI) a company acquires, they will still require human input.

However, the work capacity of each worker differs. What Mr. A can contribute, Mr. B might not be able to base on his education, professional training, and work experience.

4. Entrepreneur

Machines don’t just establish themselves in a piece of land for production to start. Someone, particularly a human, will make that to happen, and that person, whether a male or female, is regarded as an entrepreneur.

The entrepreneur’s sole aim is to take the products to consumers or the market, is to generate some profit. The entrepreneur has to take risks and inject some capital (financial) into the business to make it more successful.

So, these are the factors of production or economic resources.

What Is The Significance Of Economic Resources?

We have made mention of the economic resources (factors of production) required to kick-start a business. Now, the question is, why do you think they are of any relevance? Let’s take a look at the importance that the factors of production hold concerning business and economic growth.

  1. Any establishment that seeks improvement in all ramifications has to first and foremost, strengthen its factors of production. When this is done, the business will be able to create top-quality products and even sell to consumers at a much lower price. The bottom line is, increased production would lead to impressive economic growth. And having an improved economy will equally lead to an improvement in the standard of living of the populace. Wages would rise while costs will be reduced.
  1. Many privately owned businesses across the world are flourishing and have thousands of employees working for them. It’s a big plus to any country or economy, giving the negative effect unemployment can have on people. There’s no limit to the evil an idle mind can create. So, providing employment is an excellent way to create a better and stable society where family heads and breadwinners can provide financial support as required. The thing is this won’t be possible without one factor of production, the entrepreneur. An entrepreneur would nurse the vision combines other economic resources to create a business that can hire and compensate workers.
  1. Labor has also contributed to the development of economies around the world. In simple terms, there’s no innovation or invention in the world that started on its own. Labor is always involved, from conception to the production of the finished good. You can see how horizontal drilling, which is an improved process, has made the United States of America turn into one of the biggest oil producers the world over.


“Is money an economic resource” is the question asked. I also expect that by now, you already know the answer. Money is valuable; there’s no doubt about that. And without it, an entrepreneur may not even achieve or kick-start a business. You need money to acquire land, build or rent an office, acquire machines, and hire laborers. But in economic terms, it’s not considered to be an economic resource.

You May Like This Article As Well:

How Does Monetary Policy Affect Interest Rates?

What Is Considered Proof of Income and When Do You Need It?

How Is Economic Growth Related To Productivity? A Guide