Retail is somewhat different from other economic endeavour. Is it mostly about the provision of services or goods? Since both are involved in varying degrees, retail also functions as a vital bridge between tradable and non tradable sector activity. And even though services are involved, many aspects of retail still function as direct sources of wealth, so long as basic functions are internally reciprocated with no need for governmental redistribution or insurance reimbursements.
Regular readers are familiar with my preference for a general equilibrium two sector approach, instead of the three sector model described by Wikipedia. Chances are the three sector model was especially helpful prior to the dominance of services activity in modern economies. However, by combining their primary (raw materials such as mining and agriculture) with their secondary (manufacture) sectors, I am able to keep both tradable sector areas in a logical position as traditional forms of originating wealth. Not only do these groups continue to create a traditional base for new community formation, they comprise the majority of tradable sector activity as a whole.
On the other hand, services of all kinds have proven most likely to flourish once tradable sector activity (in the form of a traditional monetary prior) is established. For me, this is what made it seem so natural to frame non tradable sector services (along with some tradable services) as the secondary market activity which so contributes to today's economic complexity. Even though I advocate introducing services complexity as a knowledge prior for new community, this organizational capacity would still need to follow the tradable sector example of immediate resource reciprocity.
A two sector general equilibrium approach is one of active wealth initiation and active wealth response. For example, the non tradable sector of real estate functions as a response, to local income origination. Another response is the extent to which a sustained level of infrastructure maintenance can be generated. In a two sector approach, services can be more readily observed insofar as their contributions to general equilibrium, and also how general equilibrium is ultimately affected by their demands. Consider also, how time as an economic input becomes a common thread for defining and categorizing services complexity. The recognition of time as economic unit is important, since its function as a services common denominator affects productivity aggregates at general equilibrium level. When we measure an entirety of time based services input in relation to output, and contrast this with the input to output ratios of other services capacity, we also gain real economy equivalence to quantitative aspects of monetary representation.
Tradable sectors as primary and non tradable sectors as secondary, is an easier way to conceptualize sectoral relations in quantitative and comparative terms. For non tradable sector activity in particular: What matters most for aggregate productivity potential, is the extent to which time based organizational capacity of final product, makes additional demands on general equilibrium capacity. To what extent is it feasible to create additional immediate reciprocity, to offset the delayed obligations of governmental budgets and other forms of financial product? Consider as well, however, that even though dependent (secondary) services rely on tax redistribution, this is still a relatively direct form of resource reciprocity by comparison with budgets which delay payment obligations for services until well into the future.
How does retail factor into these considerations? For one, the time requirements for retail services can be quite minimal, in relation to the final product of delivered goods and indeed services which require limited amounts of time commitment for final product. Even though some retail includes a considerable amount of focused attention or personal time commitment, it still functions as a growth multiplier in a monetary context, since the majority of its final product is not dependent on time. Indeed, this revenue generating capacity places retail in a broader services category which is also capable of multiplier activity, hence some economists have begun to categorize services according to their capacity for additional growth.
While retail still includes time and place specific components, it is no longer as bound to these earlier requirements as is traditional housing, healthcare, and place based education. Consequently, retail has proven more amenable to extensive innovation, which in turn allows it to reflect supply and demand more effectively than housing, healthcare and education. Nevertheless, brick and mortar traditional retail - until recently - was still an extensive revenue source for municipalities. Alas, in a post pandemic economy, many municipalities will need to rethink their budgetary revenue strategies in the years ahead, in order to continue meeting their services and infrastructure maintenance needs.
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