Human wants constitute the starting point of all economic activities. We can satisfy these numerous wants through the consumption of goods and services. But consumption is not possible without production of goods and services.
In fact production signifies the study of ways in which goods and services become available for consumption. Hence, production occupies a pivotal position in Economics.
In common parlance, production is nothing but the creation of something new. But this is a wrong notion so far as the concept of production is concerned. In economics, the term production is used in a broad sense which includes production of both material and non-material goods. The classical economists, however, had a narrow view of production.
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They considered production as any activity resulting in the creation of material things. According to Adam Smith, a classical economist, “Production means production of material goods only”.
All the services, even though important for the prosperity and economic welfare of human beings (military, personnel, doctors, lawyers, teachers, etc.) they cannot be called production.
Such a view is not acceptable for two reasons. In the first place, man is incapable of producing material things. He can only change the form of matter in order to bring about better satisfaction of human wants.
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When a carpenter makes a table from a log of wood, he can only reshapes matters of as to make it more useful. But he cannot produce or create the log of wood.
Secondly, the definition of classical economists excluded many kinds of useful and necessary activities from the category of production, as for example, the services of doctors, lawyers, teachers and the like.
Any activity that adds to the satisfaction of human wants is regarded now-a-days as production. Some of these activities may be morally undesirable; still they should be regarded as productive. Take for example, the production of wine or poison or the services of a liquor seller.
Such goods and services may undesirable from the moral point of view. But these goods possess utility. Therefore, the definition of production has no relation to moral judgement.
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Above definition makes it clear that production means creation of utilities, Marshall used the term production in this sense. Some modern writers, however, have somewhat narrowed the definition of production by excluding from its scope activities which do not enter into the ordinary transactions of the market.
For example, the services rendered by housewives, produces from a man’s garden meant for consumption of his family, mother’s care for her child and the like are excluded from the category of production because these have no exchange value.
Thus, according to Cairn cross, “Production is the making of goods for sale or the rendering of paid services”. According to Meyers, “Production is any activity that results in goods and services intended for exchange”.
Therefore, Production now-a-days refers to creation of exchange value. Production is any activity which results in the creation of a utility heaving an exchange value.