I just finished an intriguing but eccentric book I’d become aware of in some way following through the thickets of reference in recently-read papers. It’s J.O.Jansson’s 2006 [amazon_link id=”1782540849″ target=”_blank” ]The Economics of Services[/amazon_link]. Intriguing because there are some interesting insights. Eccentric because he proposes a completely new way of defining services in our mental construction of the economy. I’d love to know what others have made of this book.

[amazon_image id=”0857932179″ link=”true” target=”_blank” size=”medium” ]The Economics of Services: Microfoundations, Development and Policy[/amazon_image]

The redefinition is to step away from the idea that it is intangibility that’s the defining characteristic of services. He argues that storability and ownership mark the boundary. Intangible digital ‘services’ should be classed as goods because they can be stored in a range of formats. Wholesale and retail distribution should also be classed as the final stage of goods production because ownership of the goods remains with the distributor. Business-to-business services are purely intermediate goods. Services proper are consumer services, non-storable intangible goods with localised markets (although some are sufficiently high value that the geographic dimension is irrelevant). On this basis, Jansson-services account for about 50% (not 70-80%) of the developed economies, and have been at about this level for a century.

So I’m mulling this over. It is surely right to distinguish between different economic characteristics of different services/intangibles. The geographic dimension and its relationship to ‘unit’ value of the service is a welcome addition to the analysis. I also like the introduction of time use, and the time spent consuming a service as part of its cost.

Jansson also highlights, drawing on the fascinating work of [amazon_link id=”019926189X” target=”_blank” ]Jonathan Gershuny[/amazon_link], the margin between personal services affected by the Baumol cost-disease and home production. He argues that as services such as health and education take an ever-greater proportion of income, there will be a switch into consumer capital investment enabling home production – I suppose in a parallel with electronic home music devices and orchestral performances, we might in aggregate spend less on education if Khan Academy or MOOCs offer an alternative.

Coincidentally, this is the 2nd thing I’ve read recently drawing on Baumol – the other was William Nordhaus’s terrific paper Are We Approaching An Economic Singularity? Surely Will Baumol ought to have had a Nobel Prize?