The validity of the observation by Illeris is borne out when trying to identify the sources of inspiration for research on services industries and the economy. Although one economist was moved to observe that the ‘complete neglect of services in economic theory is almost incredible given the role of services in contemporary economies’ (Hill 1977: 336), it can be suggested that much of the curiosity and pathfinding in services research has emanated outside economic geography. It can be traced to a number of seminal studies published by econo- mists based at the National Bureau for Economic Research (NBER) during the 1960s (Baumol 1967; Fuchs 1964, 1965, 1968, 1969, 1980; Greenfield 1966) and to the work of Baumol (1967) who made a distinction between services where technology could be substituted for labour (thus improving productivity) and services where such substitution was not possible. The collective importance of these studies was their focus on services as a set of activities rather than as a single (uniform) sector separate from the manufacturing sector. There is no question that much of the thinking about the economics of service producing activities is derived from the book that pulled together all his earlier work (Fuchs 1968, for a summary of the reasons why it was such a pivotal analysis see Delauney and Gardrey 1992: 99–100). The relatively recent ‘discovery’ by economic geographers of the consumer as a factor of production, for example, was already appreciated by Fuchs who notes that ‘productivity in many service indus- tries is dependent in part on the knowledge, experience, and motivation of the consumer’ (1965: 25, after Delauney and Gadrey 1992: 100).
Much of the interest in service industries and their productivity at this time was stimulated by their visible role in the economy and the changing employment structure of United States metropolitan areas (whether manifest as rapidly expanding office space, warehouses, department stores, or transportation serv- ices). Greenfield (1966) who was also working at the NBER used United States input–output data to extend understanding of the role of service industries in economic development; most importantly, he demonstrated inter-regional flows of service transactions and, in particular, the role performed by producer services. Several years elapsed before the significance of Greenfield’s monograph was appreciated by economic geographers (Daniels 2001). Such is the significance of this work for one of the enduring research themes for economic geographers working on service services that it is worth elaborating on the contribution. Greenfield acknowledged that colleagues at the NBER such as Fuchs were already stressing the significance of the ‘service economy’ but that this equated with ‘consumer services’ rather than ‘those services which business firms, non- profit institutions, and governments provide and usually sell to the producer rather than to the producer’ (Greenfield 1966: 1). These are the ‘producer serv- ices’ that owe their existence to the ‘direct purchase of services by one business firm from another’ (Greenfield 1966: 2); they have since provided the focus for a small group of researchers, both within and outside the sub-discipline, commit- ted to understanding their role in regional economic growth, the dynamics of
world cities, or economic globalisation (Beyers 1989; Sassen 1994; Stanback 1979; Stanback and Grove 2002; Stanback et al. 1981; Stern 2001).
Greenfield himself devotes a chapter to an analysis of regional and industrial employment patterns in producer services in the belief that ‘a deeper understand- ing of the economy and the conditions affecting economic growth can be gained through disaggregating the national totals (of employment) with the aim of discovering significant regional patterns’ (Greenfield 1966: 93). Using a divi- sion of the United States into nine sub-regions, the regional concentration of producer services and the degree of inter-regional change for the period 1950–1960 is explored. The now familiar uneven distribution of producer services is clearly demonstrated; some 70 per cent of the (estimated) producer service jobs are located in just four regions. Input–output analysis reveals a significant relationship between the growth of producer services, the performance of the industries that they serve, and the degree of urban concentration. Explanations for variations in the regional distribution of producer services include localisation economies pulling producer services into metropolitan regions in a self-reinforcing process of cumulative causation; an analysis that has stood the test of time. The important point is that these and other topics, while they are only tentatively explored by Greenfield, have subsequently been very central to the producer services’ research agenda for at least the last 20 years.
Not long after the group of economists at the NBER began to address services as integral to understanding economic development, sociologists were also beginning to make connections between changes in society and the rise of the service sector (Bell 1973). A shift from an industrial to a tertiary or service economy in the United States was already demonstrably under way in the early twentieth century as the share of workers in agriculture and in factories was steadily declining, to be replaced by a production system that is ‘based on the co- ordination of people and machines’ (Delauney and Gadrey 1992: 88) using scientific information and knowledge. This, in turn, promotes changes in occu- pation structure, such as the rise of the professional white-collar worker and the concomitant reliance on social networks for production rather than interactions between people and machines. From the perspective of this chapter, the signifi- cance of the writings by sociologists such as Bell and others with a similar disci- plinary background (Browning and Singelmann 1975; Gershuny 1978, 1983; Sassen 1992) is that they provoked more careful thinking about the ways in which services as a fast-emerging category of economic activity were shaping production and, later, consumption. Some economists also explored the signifi- cance for economies of the evident decline in the share of manufacturing, often using the term ‘de-industrialization’ (Blackaby 1978; Bluestone and Harrison 1982). Others, such as Bressand and Nicolaidis (1989), Dunning (1989) or Miles (1993) extended the coverage to service and the global economy, the role of service multinational enterprises, or challenged the idea that service economies had replaced industrial economies; services were simply an expression of a new industrial economy. Political economists such as Petit (1986) and Hirschorn (1974) diversified the debate about the significance of the shift to services in
relation to the drag they exerted on economic growth or the importance of earlier waves of labour and capital saving during the 1920s in the US that opened the door for new forms of work and societal development in the form of services. Another theme which has greatly exercised those involved with services research is definition, classification and the related availability of suitably detailed/accurate statistics. The root of the anxiety can be traced, at least in part, to the uncertainty about the actual distinction between goods and services (see above). This is encapsulated in an early and very important paper by Hill (1977), an economist, in which the concept, definition and measurement of a service is elaborated in considerable detail. For Hill there is a major distinction between services affecting goods (such as the changes in the physical condition of goods by cleaning, repairs or decoration) and services affecting persons (changes in their mental or physical condition by activities such as education, entertainment, surgery, personal service, or communication) (see Hill 1977: 319–25). The outcomes from these two ‘streams’ of services may be permanent or temporary; a haircut brings about a temporary change in so far as it will need to be repeated while, other things being equal, surgery will generate a permanent change that is not reversible. It is also possible to distinguish, for both service ‘streams’ changes that are physical and changes that are mental, e.g. an entertainment experience or a sense of well being after a short holiday. Finally, some services such as education can be provided collectively as well as individually and can be distinguished from ‘pure public services’ such as fire, police and similar govern- ment services that ‘Individuals are deemed to consume . . . all the time whether or not they want such services or are even aware of them’ (Hill 1977: 338). The value of this analysis is its demonstration of the complexity of defining services and the knock-on effect on the potential for very complicated cross-classifications. Definitive solutions have yet to be produced; a group such as the Voorburg Group on Services Statistics (comprising national and international statistical agencies) are testament to this. Created in 1986 in response to a request from the United Nations Statistical Office (UNSO) for assistance in developing services statistics, the Group (statisticians, economists) involves exchanges amongst national statistical agencies and international organisations that lead to solutions of particular problems or the development of international guidelines in the field of service sector statistics. In recent years its agenda has expanded to include topics such as ways of estimating the real product of service activities, prices of service products, international trade in services, and employment, skills and occupations in the service sector.