This chapter provides a critical survey of the rational expectations and implicit contract theories. It attempts to provide a rationale for Keynesian type behaviour in industrial labour markets, in a world of irreducible uncertainty, moral hazard and firm-specific human capital. The chapter examines various policy dilemmas in the current stagflationary conjuncture; argues that constant money supply growth rate rules are not operational in the pure credit economies that are characteristic of most OECD countries and thence argues for reintroducing interest rate policy as the major instrument of monetary stabilisation. The intuitive power of the notion of rational expectations derives from its validity in a number of important real world markets - these are the well-organised markets for primary commodities, foreign exchange and common stocks. The existing policy differences between so-called “monetarists” and Keynesians reflect in part the long-standing controversy between the banking and currency schools on the nature of “money”.