16 Brookings Papers on Economic Activity, 1: 988 independent of wages. That is, given long-term relationships with their workers, firms may choose the efficient amount of employment rather than moving along their labor demand curves when real wages change I8 In many product markets, on the other hand, buyers clearly operate on their demand curves. Forexample, the local shoe store has no agreement, explicit or implict, from its customers to buy the efficient number of shoes regardless of the prices. Instead, rigidity in the stores prices affects its sales of shoes -Real wages need not be countercyclical. As we argue above acyclical real wages are possible even if nominal rigidities occur only in wages. But it is easiest to explain acyclical or procyclical real wages if prices as well as wages are sticky. In this case, the effect of a shock real wages depends on the relative sizes of the adjustments of prices and Despite the advantages of studying rigidities in goods markets, we are ambivalent about the deemphasis of labor markets, because the apparent rigidities in nominal wages may have important allocative effects Further research on the relative importance of wage and price rigidities is needed DISCUSSION We conclude this section by discussing several issues concerning the importance of recent theories and their plausibility The importance of Nominal rigidities. Nominal rigidities are essen- tial for explaining important features of business cycles. As we have emphasized real effects of nominal disturbances, such as changes in the money stock, depend on some nominalimperfection. The only prominent alternative to nominal rigidities is imperfect information about the aggregate price level, an explanation that many economists find implau- sible. It is possible, of course, to maintain that money is neutral in the short run-that Paul Volcker, for example, had nothing to do with the 1982 recession-but this also appears unrealistic to many economists 18. Early expositions of this idea appear in Martin Neil Baily, Wages and Employment under Uncertain Demand, Review of Economic Studies, vol 41(January 1974), pp 37 50; Costas Azariadis, ""Implicit Contracts and Underemployment Equilibria, Journal of Political Economy, vol. 83(December 1975),pp. 1183-1202; and Robert E Hall, The gidity of Wages and the Persistence of Unemployment, BPEA, 2: 1975, pp. 301-35