The Constituents of the “Total Economic Costs of Production”

• • Land – and we will include in this category any impact to the environment or ecology.
  • Capital Goods  – including buildings and other non-land equipment.
  • Money  –  some of which is Fixed Costs and some of which varies with the quantity produced.
  • Raw Materials  –  the inputs of either natural products or other commodities, including any degradation to the environment (the environmental capacity for waste disposal is a “raw material”).
  • Labour – the Intrinsic Value necessary to attract labour.
  • Economic Profit  –  the incentive for producing anything rather than nothing, and investing the inputs in other pursuits.
  • Opportunity Profit  –  the incentive for producing this commodity , rather some other commodity.  (Under “perfect competition”  this will tend to zero.)

Costs are “Fixed” only in the short term.  In the longer term, or when considered across the economy as a whole, all costs are Variable.

Production will not be initiated unless there is an Opportunity Profit.

Production will continue as long as Fixed Costs are recovered.

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