O UR understanding of the serviceproducing sector of the economy is seriously constrained by the inadequacy of measures of real output for the major service industries. Analyses of industry growth and productivity are only as good as the industry output measures on which they are based; and for many service industries (especially finance, insurance, government administration, health services and education) the real output measures that are generally adopted are poor indeed. In some cases production in the service sector, as measured in the national accounts, is no more than an index of labor input, with the result that the calculation of productivity change is essentially a tautological exercise. In almost all cases economists have had to reconcile themselves to the fact that at least part of the disparity in productivity growth between the service and goods-producing industries is a statistical illusion resulting from the inadequacy of existing data and techniques of measurement.