George Grantham, McGill University

This paper examines the relevance of recent developments in macroeconomics for the interpretation of pre-industrial economic fluctuations. The models drawn on for this examination all involve the possibility of rational expectations equilibria with less than fully employed resources. The mechanisms that produce these outcomes include increasing returns in technology, in the number of market participants (ÔthickÕ versus ÔthinÕ markets), and strategic coordination failures. As models of this type are designed to answer issues surrounding high-frequency economic fluctuations, the first issue that must be addressed is whether the approach they embody can be adapted to the low-frequency fluctuations that characterized pre-industrial economic history. The paper argues that it can. One implication of multiple-equilibrium macroeconomics is that observed states may not reflect the exhaustion of productive opportunities. This possibility throws doubt on the conventional neoclassical growth-accounting interpretation of long-run economic change. Specifically, what seems to be growth caused by exogenous shifts in the economyÕs fundamentals may reflect a traverse from a low to high equilibrium. This possibility is raised by recent evidence on the high level of productivity and specialization in classical antiquity and the high level of agricultural productivity in 13th-century Europe. The final part of the paper sketches out reasons for thinking that agricultural supply was not a binding constraint on the equilibrium states of pre-industrial economies.