Matt Yglesias thinks there could be benefits for the economy if we had a little more Christmas. Maybe he is being tongue-in-cheek, but for what it’s worth I will take him at face value:
The real economic case for Christmas is macroeconomic. There’s an old Keynesian saying: It takes a lot of Harberger triangles to fill an Okun Gap. Which is to say that the total amount of harm done by micro-inefficiencies is small compared with the massive harms associated with the macroeconomic slack of recessions.
Most people do not realize this because the media generally report on seasonally adjusted macroeconomic data, but there are gigantic economic fluctuations associated with the passage of the seasons. As Robert Barsky and Jeffrey Miron have shown, the seasonal business cycle is comparable in size to the official business cycle. The economy in effect enters a recession every January, grows steadily over the next several months, slumps again in the third quarter, and then booms in the fourth quarter. Anton Braun and Charles Evans have shown a couple of further surprising facts about this seasonable business cycle (PDF). One is that not only does total output boom in the fourth quarter, but total-factor productivity booms as well. TFP is the X-factor in economics often labeled “technology” but in fact simply meaning whatever element of productivity isn’t accounted for by the use of more labor or more capital. The TFP boom is moderately surprising since there’s a boom in Christmas temp hiring (and then big layoffs in January) meaning the marginal workers in Q4 should be lower quality than the marginal worker at other times. The second surprising fact is that they show the entire seasonal cycle is essentially just driven by Christmas.
Put those together and it looks like Christmas not only leads to more people working, but faced with a surge of demand, managers somehow manage to get everyone to work smarter and more efficiently even as the total number of workers grows. …
We experience an annual January-March recession that would be considered intolerable if not for the fact that the Bureau of Labor Statistics seasonal adjustment algorithm makes it go away. But we should be aspiring to have Christmas-esque levels of production all the time. The fact that some of the Christmas output is wasteful (presents people don’t want, etc.) isn’t a big deal compared with the fact that there’s much more output overall.
Some background: by “a few micro-inefficiencies” MY is referring to one of the costs of a system of gift-exchange: we are often given gifts (and give gifts) we would not have chosen to buy ourselves at that price. It’s a nice gesture for me to give you a scarf, and for you to give me a tie, but if you would never have bought the scarf for yourself, and I would never have chosen that tie for myself, we might have been better going shopping together, and you could choose your own scarf and I could choose my own tie. That’s not all that gift-giving is about, of course (some economists do give gifts!), but it’s a small cost.
When he refers to the macroeconomic slack of recessions, he means underemployment of resources. In a recession, there are underemployed and unemployed people who would like to work if they could find something, and capital resources sit relatively idle. At Christmas, employment tends to rise with all the shopping we do, and there is a (predictable) mini-boom. In the months following Christmas we have a (predictable) mini-recession, as shopping slacks off. This isn’t reported much, as MY says, because many of the macro statistics we are served in the media are seasonally-adjusted, and so understate the degree of monthly fluctuation.
Let’s put this in an arts context. Ballet companies cater to large audiences in December with productions of The Nutcracker. An annual tradition, demand for tickets is expected to be high, and revenues are earned that somewhat cross-subsidize other productions and activities through the rest of the year.
Well, nothing is preventing ballet companies from adding a production of The Nutcracker in March. Why not? I don’t think the answers are hard to see. There wouldn’t be much increase in annual earnings, as it is unlikely that a greater number of people over the course of the year will attend. Those who went in December won’t attend in March. So it doesn’t give us overall growth for the ballet company, or, on a macro scale, the economy at large.
OK, but maybe it is still useful to even out demand over the year, to reduce the seasonal fluctuations? But seasonal fluctuations are not really that big a deal. Ballet companies and other companies expect that workload will vary over the seasons – we teachers know that very well. It doesn’t cause great problems because companies don’t go through boom-and-bust hiring-and-firing on a seasonal basis – that would be too expensive, filled with transactions costs. So, companies tend to hang on to full-time employees month-by-month when they expect annual cycles.
MY is surprised that productivity rises at Christmas, when some temp workers are hired. But I’m not: workers are more productive then because they are busy. People working retail are not “working smarter” during the Christmas rush, they are just putting through lots of value-added because of the volume of sales.
We can’t magically create Christmas-y output all year long, even if there were a decree that there shall be a Christmas every season.
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