and in this case, and in the proofreading case, the hidden factor is that by getting better lawyering or proofreading, each person has more time (or money) to do something else. Even the laundry example works if everyone uses the free time they get by having someone else do their laundry more efficiently to grow crops, or raise children.
I think most people are missing the point. There is tons of work but only one job and not everyone is doing that job (laundry). People are maintaining there own house, doing their own farming and hunting/fishing for meals. They all do their own cooking and perhaps raise animals. This is a busy life and washing cloths takes a lot of time when their are only so many hours in day. Some people are are not able to maintain all of this daily work for various reasons, widows perhaps. What they can do is provide a laundry service for people that are over worked. So it’s the only “real job”. In this closed society all people are not making a living just doing each others laundry, only a few.
This would be the difference between manufacturing and service. Laundry returns to you the same clothes you had, but ready to wear. Obtaining tools or clothing or other capital (tools) or consumables (food, clothing) is creating wealth that did not exist before. Of course, the relative value of these goods go down if there is a glut on the market.
Although in the Italian Town example, there are obvious consumables like food and new clothes that need to be introduced into the system regularly. So the inhabitants are doing something other than simply serving each other. The essence of a consumer economy is that we consume things. A service economy evolves when the production of consumables is sufficiently non-labour-intensive that a significant part of the population can instead provide services.
(IIRC in Jack Vance’s Big Planet, a sort of Gulliver’s Travels story, they run across a place where everyone lives in the lap of luxury waited on hand and foot - until they voyagers realize that everyone takes turns being the servants for the day for each other so they can live the life of luxury in turn.)