Traditional economics teaches that businesses—and the wealth they create—depend on the combination of three essential things, often referred to as the factors of production: land, labour and capital. Any entrepreneur, it was thought, must have at least one of these factors, and probably a combination of all three of them, in order to actually form a business. A farmer must have some land, and probably at least a tractor (capital), and at very least one person to drive the tractor (labour). Manufacturers, banks, resource producers, and grocery store operators all need various quantities of all three. More modern service providers, such as an on-line accountant or photographer, may not need that much land, but would at very least need a computer and an Internet connection (capital).
But none of these three factors of production are limitless. It may often be possible to acquire more of any one factor, but often the price of these resources starts to rise as scarcity kicks in. The field of economics as it has been taught for most of the 20th century is essentially the study of how humans have combined these three limited resources (i.e., supply) in such a way that tries to satisfy the unlimited human desires (i.e., demand) within the economy.
But the obviousness of the land-labour-capital troika of production misses a key ingredient that is in reality far more essential than any of these three factors alone: ideas. Any combination of land, labour and capital can produce nothing without an idea originating in some entrepreneurs mind. It is the idea of how to combine fertile soil, seeds, and water that produces wheat. It is the idea of how to combine clay, water, and a spinning wheel that produces an attractive piece of pottery. It is the idea of how to combine wood, steel, glass and a plot of land in a subdivision that produces a new home.
Unlike land, labour or capital, the ideas that originate from the human mind face no scarcity. There is absolutely no limit to the number of ideas that can flow from our imaginations. And since all wealth originates with ideas, it is quite fortunate and encouraging that ideas are indeed limitless.
Good ideas are often the forgotten piece of the puzzle in our attempts to generate wealth, economic growth and productivity. Greg Ip, a Canadian-born economist who worked as a journalist for the Globe and Mail, the Wall Street Journal, and now The Economist magazine, writes: “In the long run, a country becomes rich or stagnates depending on whether it has the right mix of people, capital and ideas. Get these fundamentals right, and the short-run gyrations seldom matter.”
So if ideas are responsible for finding new ways to combine land, labour and capital in ways that create wealth, if follows that the recipe for Canada’s prosperity in the 21st century would involve strategies of coming up with new ideas. As long as we continue to generate ideas for new products, new processes, and new ways to preserve our environment, our prosperity will be guaranteed. The new Canadian entrepreneur of the 21st century will embody the notion that ideas create wealth.
 Ip, G. “The Little Book of Economics” John Wiley & Sons Inc., 2010, pg. 4