People often bunch their activities at common points in time. Most people work from 9 AM to 5 PM rather than from 10 PM to 6 AM. One reason is that these are daylight hours, but another reason is because everyone else is working during this time. If you and your coworker are in the office at the same time, it is easier to collaborate. Furthermore, working is more fun when you do it with other people.

We also like to party at the same time and to see movies and concerts with other people. It’s not just a question of fun—it is also economics. If you want to cook an elaborate meal, order some fancy bottles of wine, or clean up the house for a party, you want to make sure that enough people attend for those efforts to be worthwhile.

Most generally, many economic activities bunch or cluster in time because it pays to coordinate your economic actions with those of others. That just means that we want to be investing, producing, and selling at the same time that others are investing, producing, or selling. In short, economic activity tends to cluster together in time just as it clusters together in space. (What do we call a cluster of economic activity in space? A city.)

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Bunching occurs across different time frames. There is bunching across the course of a single day; GDP grows more during the 9-to-5 hours than late at night, for example. But there is also bunching across weeks, months, and quarters. The “seasonal business cycle” is one form of economic clustering in time. The fourth quarter of the year—October through December—brings more economic activity than any other time. Production is higher, sales are higher, and GDP grows faster, relative to the other parts of the year. After Christmas is over, however, the party ends and GDP in the next period is typically lower. GDP also tends to grow slowly during the summer months. The point is not that we should abolish Christmas or summer vacation, but rather that seasonal cycles help us understand some features of regular business cycles.

Once some economic activity is moving in the upward or downward direction, other parts of economic activity tend to follow that momentum in order to gain the advantages of time bunching. The clustering of economic activity in time makes buying and selling more efficient, but it also causes shocks to spread through the economy and to spread through time. Let’s say that a negative economic shock arrives and the economy slows down in the current period. Many people are less keen to work, and they will save up their working for some point in the future (intertemporal substitution, as discussed earlier). This effect will induce others to cut back on their work as well. If the Indian farmers work less when the weather is bad, then tractor salespeople will probably work less as well. Similarly, if fewer people are showing up at the office, you might be less productive as well. You’ll be more likely to stay home and more likely to make your big work effort during some other period, perhaps when you expect the office to be up and running at full speed. So if some people retreat from full-speed work, these decisions spill over onto others and cause them to cut back their effort as well.