His answer was the market for capital – namely the stock market – since that way it could have the most direct effect on the cost of capital, later known as Tobin’s q, which he saw as the main price through which the central bank could affect economic activity.
Moreover, it has become apparent that wages no longer react quickly to large changes in relative prices such as those generated by oil-price shocks or, more recently, by auto insurance premiums. This is a very important contribution to labour market performance in Canada because it suggests that relative wages tend to better reflect demand and supply conditions in particular markets.