On the Notion of ‘Factor of Production’ in Economic Theory

In the marginalist view, production results from the services of the factors, with wages, rent and interest understood as rewards for their contributions. The principle of marginal productivity provided a logical foundation for this idea; but this mechanism requires factors measured in ‘technical units’, so it cannot be used when capital is understood in value terms. The theory then shifted towards a Walrasian conception with heterogenous capital goods and fixed‐coefficient methods. Initially, some scholars believed this approach could be consistent with viewing distribution variables as rewards for factor contributions. The capital theory controversy revealed that this is not the case.