Macroeconomic Instability and the “Natural” Processes in early Neoclassical Economics

It may seem odd to disinter an economic theory—in this instance, William Stanley Jevons's claim that sunspots caused macroeconomic fluctuations—which no one now believes or much cares about. In fact, my purpose is not to scoff at a dead theory, but to use it as a pretext to discuss the following issues: economic historians often have suggested a dichotomy between a premodem and industrial macroeconomy, with the premodern economy largely at the mercy of weather and other natural phenomena; the dichotomy is rooted in early neoclassical economic theory (here restricting ourselves to Jevons); there is little historical evidence that premodern macro fluctuations were caused by natural disturbances, such as the weather (here restricting ourselves to the case of England); and the above three theses have some interesting implications for the way economic policy is conceived, both then and now.