A general equilibrium arbitrated by prices arising from consumers and firms interacting in markets is a core idea in economic analysis and provides powerful insight into many historical issues. Modern computational models permit investigators to exploit the insights of general equilibrium. This article outlines the ideas of general equilibrium and of computational general equilibrium models. In the process, strengths and limitations are discussed. The discussion is given focus by using the Harley-Crafts model as its focus and explores briefly the consequences of changing the allocation principals in the agricultural sector of the model from a capitalist arrangement to a peasant arrangement.Historians aim to understand social change; economic historians specifically aim to understand how economies evolved by identifying causes and mechanisms of change. We need to know not only the details of how a proposed cause evolved and to trace its impact on the society but also to imagine cases in which the cause was not present. Unfortunately, history seldom provides exact evidence. Comparable situations, except that the imagined cause is absent, never occurred exactly as we would like. Consequently, we must use creative imagination disciplined by historical evidence and theories of social behaviour. The historian's imagination fruitfully draws on a wide range of sources. Much important history rests on contemporaries' perceptions or on insights from comparative analysis. In economic history, economist's theories provide important insights. Here, I want to discuss the use of formal economic models, in particular, computational general equilibrium models. European Review of Economic History, , -. Printed in the United Kingdom © Cambridge University Press Perhaps the first computational general equilibrium model in the economic history literature was John James' (, ) analysis of the antebellum American tariff. He also provided an overview of general equilibrium models in economic history (James ). I pointed out (Harley ) that James' results depended on questionable simplification of his computational model. More recently Kevin O'Rourke has been the main user of CGE models in economic history. He has analysed Irish economic history since the mid-nineteenth century (O'Rourke a, b, c; a, b; ). He has used the technique as part of a multi-authored project on convergence in the late nineteenth century (see various articles cited in the bibliography; O'Rourke and Williamson summarises the project). I have used CGE techniques to address issues of the British Industrial Revolution (Harley , Harley and Crafts ).
European Review of Economic Historydecisions. A profit-maximising firm faces a range of decisions regarding product choice and scale of production. Minimising the cost of producing the chosen amount of a product (Q) is fundamental to successful operation and is a key focus of formal general equilibrium analysis. To minimise costs a firm must, of course, pursue tec...