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While “Christmas” is new, the notion of a consumption splurge after the fall harvest, followed by a lean late winter-early spring season (Lent/Ramadan) before the spring harvest is deeply rooted in pre-modern agricultural reality. When you have an abundance of perishable goods it makes sense to consume them before they go bad, and then to string out the more limited supply of durable foodstuffs when fresh foodstuffs are scarce. In the same way, summer vacation is rooted in the need to free up children for agricultural labor at times of peak demand. As noted above, spring weddings supply a consumption boost after the Spring Harvest and also are timed to minimize the likelihood of critical parts of a first pregnancy taking place during the lean late winter-early spring (although these days it has more to do with the end of the school year).

Only with cheap and fast trans-hemispheric shipping (together with a lack of significant piracy for most of that trade), and advances in food preservation and refrigeration in the last half century or so, have those agricultural considerations become irrelevant (although, of course, excess and lean times should fall at different parts of the year in the Southern hemisphere and in places like Southern India, the Sahel, and the tropics of Asia, African and South America that have different seasons).

Japan and China use end of year bonuses (often as 6-12% of annual compensation) as a significant part of annual compensation as a way to share rather than leveraging macroeconomic risk for firms and the economy as a whole. In good years, when there is more supply, lots of people get big bonuses; in bad years, scarcity is widespread. The main virtue of this approach is that it makes firms more robust and puts them under less pressure to engage in cyclic layoffs but making labor costs look more like equity and less like debt. This too was well suited to an agricultural tradition rooted in sharecropping or the equivalent that was once widespread in all feudal economies as well as in neo-feudal economies in places like the American South. This isn’t a strategy limited to the orient. It is also the quintessential Wall Street economy model utilized by major financial firms like investment banks and the large law firms that serve them.

The pressure from the “real economy” – both the goods and services supply side and the labor demand side – to have punctuated consumption is much weaker now than it once was, particularly in economies or sectors of economies without the strong annual bonus tradition. The largest sectors of the modern economy that are both strongly cyclic in terms of business cycles and very seasonal within each year, are construction and real estate – and these cycles also drive a fair amount of durable goods consumption. Both construction and real estate are weakest in the winter. Agriculture’s share of the economy is now much more stable from a consumer’s perspective and much smaller as a percentage of the total economy. Real estate handles cyclic shifts by being largely commission based. Construction relies on highly fragmented project specific team building through networks of general contractors and subcontractors rather than integrated firms (a pattern also common in the film industry and theater industry).

Bottom line: The finance oriented macroeconomic models obsessed with interest rates, inflation, GDP growth rates, unemployment rates and size of the public finance sector are ill suited to analyzing optimal seasonal business cycle patterns. A more fruitful analysis looks at the roots of current seasonal patterns in economic history and at the way that the “real economy” has changed with technology to see if those patterns still make sense, perhaps for new reasons.

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