monopolies can sell where their price exceeds marginal cost, they tend to have excess capacity. Thus, as demand increases, the excess capacity shrinks and marginal cost approaches price and in that way it is procyclical. This idea captures the distinction between real productivity and productivity growth; while there is greater productivity (less is being wasted), workers aren't becoming more productive. To explain sticky wages, Hall emphasizes the importance of costs borne by the employer. Firms benefit when times are good but are penalized when times are slim (because wages are usually fixed) and they pay for searching for a good employee/employer match. Thus, employers are more risk averse in hiring and have less incentive to engage in search. Hence employers simply do not hire in down times. Since workers cannot collectively signal that they would work for less in down times, wages have a tendency to stick upwards. He also supported the Reagan tax cuts: "If we don't have a tax cut, there will be that much more room for pouring money down rat holes." References External links Stanford home page 1943 births Labor economists Living people 21st-century American economists Fellows of the Econometric Society Macroeconomists Time series econometricians Members of the United States National Academy of Sciences New classical economists University of California, Berkeley alumni MIT School of Humanities, Arts, and Social Sciences alumni Stanford University Department of Economics faculty Presidents of the American Economic Association Fellows of the American Academy of Arts and Sciences