--- title: "Meaning & Key Takeaway of: I have concluded that most PhD economists…" description: "\"I have concluded that most PhD economists under appraise the power of the common-stock-based \"wealth effect,\" under current extreme conditions... \"Weal..." image: "https://sms4smile.com/quotes/i/2ee/charlie-munger-458_academic_i-have-concluded-that-most-phd-economist_788569.jpg" --- # I have concluded that most PhD economists under appraise… ![“I have concluded that most PhD economists under appraise the power of the common-stock-based "wealth effect," under current extreme conditions... "Wealth effects" involve mathematical puzzles that are not nearly so well worked out as physics theories and never can be... What has happened in Japan…” quote by Charlie Munger](https://sms4smile.com/quotes/i/2ee/charlie-munger-458_academic_i-have-concluded-that-most-phd-economist_788569.jpg) [Download](https://sms4smile.com/quotes/i/2ee/charlie-munger-458_academic_i-have-concluded-that-most-phd-economist_788569.jpg) [Open image](https://sms4smile.com/quotes/i/2ee/charlie-munger-458_academic_i-have-concluded-that-most-phd-economist_788569.jpg) > “I have concluded that most PhD economists under appraise the power of the common-stock-based "wealth effect," under current extreme conditions... "Wealth effects" involve mathematical puzzles that are not nearly so well worked out as physics theories and never can be... What has happened in Japan over roughly the last ten years has shaken up academic economics, as it obviously should, creating strong worries about recession from "wealth effects" in reverse.” [Charlie Munger](https://sms4smile.com/quotes/author/charlie-munger/) ## About This Quote This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation. Munger warns that economists overestimate how changes in stock prices affect consumer spending, especially in extreme market conditions, and that recent Japanese data challenge these assumptions. **In simple terms:** Economists may misjudge stock‑price impacts on the economy. Key Takeaway Question assumptions about wealth effects. Themes economics risk behavior policy Mood cautious analytical Type critical analytical When to use this quote - investment decisions - policy analysis - academic research - market forecasting Key Concepts wealth effect macroeconomic modeling behavioral finance Questions to Reflect On - How reliable are wealth‑effect estimates in volatile markets? - What alternative indicators could better predict consumer behavior? A Different Perspective The relationship between stock prices and spending is complex and may reverse in downturns. ★ ★ ★ ★ ★ No ratings yet [Academic](https://sms4smile.com/quotes/about/academic/) [Appraise](https://sms4smile.com/quotes/about/appraise/) [Creating](https://sms4smile.com/quotes/about/creating/) [Economics](https://sms4smile.com/quotes/about/economics/) [Economist](https://sms4smile.com/quotes/about/economist/) [Economists](https://sms4smile.com/quotes/about/economists/) [Extremes](https://sms4smile.com/quotes/about/extremes/) [Money](https://sms4smile.com/quotes/about/money/) [Physics](https://sms4smile.com/quotes/about/physics/) [Puzzles](https://sms4smile.com/quotes/about/puzzles/) [Recessions](https://sms4smile.com/quotes/about/recessions/) [Wealth](https://sms4smile.com/quotes/about/wealth/) [Worry](https://sms4smile.com/quotes/about/worry/) ## Related quotes > [Negative interest rates hurt banks' balance sheets, with the 'wealth effect' on banks overwhelming the small increase in incentives to lend.](https://sms4smile.com/quotes/joseph-stiglitz/negative-interest-rates-hurt-banks-balance-sheets-with-the-wealth/) [Joseph Stiglitz](https://sms4smile.com/quotes/author/joseph-stiglitz/) > [The glue that kept the consumer market together the last few years was the wealth effect from the housing boom.](https://sms4smile.com/quotes/joel-c-rosenberg/the-glue-that-kept-the-consumer-market-together-the-last-few-years/) [Joel C. 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