ainstream macroeconomics is in disarray. Perusal of commonly used textbooks in macroeconomics will con- firm that impression without much difficulty. Unfortu- nately, the same statement could have been made, and often was made, fifteen years ago. While in this sense little has changed in recent years, the disarray is now more fundamental and severe than at any time since the 1930s. Amidst this disarray a variant of Keynesianism identified as Neo- or New Keynesianism emerged in which the workings of labor markets are analyzed to a degree that is uncharacteristic of the orthodox Keynesian tradition. The key element in the New Keynesian analysis of the labor market is the concept of "efficiency wages." In what follows, the concept will be criticized, though criticisms that have been offered by main- stream economists will largely be ignored. Instead, this essay will focus on the criticism that follows from an Austrian perspective on entrepreneurship and the business cycle. It will be argued that the concept of efficiency wages provides an poor answer to the question of why wages are not sufficiently flexible so as to elmi- nate fluctuations in unemployment, and that from an Austrian perspective the question is not all that relevant.