The Service Economy: More Than Meets the Eye
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Our economy produces two kinds of things: goods and services. Goods are material objects that can be touched—a jet plane, a hammer—and are, therefore, tangible. Services, on the other hand, are not material, cannot be touched and are intangible. Some examples: a song, a taxi ride, a lawyer’s charge to a client. Added together, goods and services with prices attached constitute the total output of our economy (Gross Domestic Product, or GDP).
It may come as a surprise to learn that in our economy, 80 percent of the labor force is engaged in the production of services—a ratio of four-to-one over goods (incidentally, in underdeveloped economies, this ratio is just about reversed, meaning that we can measure the level of development of an economy by how fast and in what direction the ratio of services to goods is changing). Many writers correctly describe ours as a service economy. Services therefore deserve serious analysis.
It wasn’t always thus. The early economists, astute as they...