Summary

Jan Owen Jansson argues that conventional economic theory is too focused on material goods markets. By making the special character of services (immaterial goods) as market objects the starting-point for the economic system analysis, a new view of the big problems of a mixed economy is offered.

The author describes the present structure, past development and micro foundations of the service sector. He reasons that contrary to what the new service economy 'heralds' claim, the share of service consumption in total consumption is not increasing, but has been about 50 per cent in real terms for a long time. The structural change of the economy that has been most important for the service sector development is the spatial reorganization of economic activities resultant from the urbanization process. This has been the main driving force which has offset the widening productivity gap between goods and services production, due to Baumol's cost-disease, and which explains how the overall rate of economic growth has been maintained at an all time high level during a century when service sector employment has expanded from 20 per cent to 70 per cent of total employment.

Jan Owen Jansson's policy analysis is that we should strive for a real service economy where a much larger share of total consumption in real terms is constituted by services. He argues that this state will not automatically arise, but requires an allocation policy that takes the fundamental differences between goods and services both on the cost side and demand side into account.

This book will strongly appeal to a wide-ranging audience including researchers, lecturers and academics with an interest in general microeconomics, transport, urban and regional economics, economic geography and economic history. It will also be of great value to central and local government officials, and all those who are interested in the long-term future of our society.