In 1988 services moved ahead of manufacturing as the main product of the United States economy. But what is meant by "services"? Some economists define a service as something that is produced and consumed simultaneously, for example, a haircut. The broader, classical definition is that a service is an intangible something that cannot be touched or stored. Yet electric utilities can store energy, and computer programmers save information electronically. Thus, the classical definition is hard to sustain.

The United States government's definition is more practical: services are the residual category that includes everything that is not agriculture or industry. Under this definition, services includes activities as diverse as engineering and driving a bus. However, besides lacking a strong conceptual framework, this definition fails to recognize the distinction between service industries and service occupations. It categorizes workers based on their company's final product rather than on the actual work the employees perform. Thus, the many service workers employed by manufacturers—bookkeepers or janitors, for example—would fall under the industrial rather than the services category. Such ambiguities reveal the arbitrariness of this definition and suggest that, although practical for government purposes, it does not accurately reflect the composition of the current United States economy.

In comparing the United States government's definition of services with the classical definition, the author suggests that the classical definition is

more pragmatic

more difficult to apply

less ambiguous

more widely used

more arbitrary


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