Economic Geography

The role of non-geographers
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
114
Peter W. Daniels

---

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