Lawrence Robert Klein (September 14, 1920 – October 20, 2013) was an American
economist
An economist is a professional and practitioner in the social sciences, social science discipline of economics.
The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this ...
. For his work in creating
computer model
Computer simulation is the process of mathematical modelling, performed on a computer, which is designed to predict the behaviour of, or the outcome of, a real-world or physical system. The reliability of some mathematical models can be deter ...
s to forecast
economic trend
*all the economic indicators that are the subject of economic forecasting
**see also: econometrics
*general trends in the economy, see: economic history
Economic history is the academic learning of economies or economic events of the past. R ...
s in the field of
econometrics
Econometrics is the application of Statistics, statistical methods to economic data in order to give Empirical evidence, empirical content to economic relationships.M. Hashem Pesaran (1987). "Econometrics," ''The New Palgrave: A Dictionary of ...
in the Department of Economics at the
University of Pennsylvania
The University of Pennsylvania (also known as Penn or UPenn) is a private research university in Philadelphia. It is the fourth-oldest institution of higher education in the United States and is ranked among the highest-regarded universitie ...
, he was awarded the
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel ( sv, Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), is an economics award administered ...
in 1980 specifically "for the creation of econometric models and their application to the analysis of economic fluctuations and economic policies." Due to his efforts, such models have become widespread among
economist
An economist is a professional and practitioner in the social sciences, social science discipline of economics.
The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this ...
s.
Harvard University
Harvard University is a private Ivy League research university in Cambridge, Massachusetts. Founded in 1636 as Harvard College and named for its first benefactor, the Puritan clergyman John Harvard, it is the oldest institution of higher le ...
professor
Martin Feldstein told the
Wall Street Journal
''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
that Klein "was the first to create the statistical models that embodied
Keynesian
Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output an ...
economics," tools still used by the
Federal Reserve Bank
A Federal Reserve Bank is a regional bank of the Federal Reserve System, the central banking system of the United States. There are twelve in total, one for each of the twelve Federal Reserve Districts that were created by the Federal Reserve A ...
and other central banks.
Life and career
Klein was born in
Omaha, Nebraska
Omaha ( ) is the largest city in the U.S. state of Nebraska and the county seat of Douglas County. Omaha is in the Midwestern United States on the Missouri River, about north of the mouth of the Platte River. The nation's 39th-largest cit ...
, the son of Blanche (née Monheit) and Leo Byron Klein. He went on to graduate from
Los Angeles City College
Los Angeles City College (LACC) is a public community college in East Hollywood, Los Angeles, California. A part of the Los Angeles Community College District, it is located on Vermont Avenue south of Santa Monica Boulevard on the former campu ...
, where he learned
calculus
Calculus, originally called infinitesimal calculus or "the calculus of infinitesimals", is the mathematical study of continuous change, in the same way that geometry is the study of shape, and algebra is the study of generalizations of arithm ...
; the
University of California, Berkeley
The University of California, Berkeley (UC Berkeley, Berkeley, Cal, or California) is a public land-grant research university in Berkeley, California. Established in 1868 as the University of California, it is the state's first land-grant u ...
, where he began his
computer model
Computer simulation is the process of mathematical modelling, performed on a computer, which is designed to predict the behaviour of, or the outcome of, a real-world or physical system. The reliability of some mathematical models can be deter ...
ing and earned a
BA in Economics in 1942; he earned his
PhD in Economics at the
Massachusetts Institute of Technology
The Massachusetts Institute of Technology (MIT) is a private land-grant research university in Cambridge, Massachusetts. Established in 1861, MIT has played a key role in the development of modern technology and science, and is one of the ...
(MIT) in 1944, where he was
Paul Samuelson
Paul Anthony Samuelson (May 15, 1915 – December 13, 2009) was an American economist who was the first American to win the Nobel Memorial Prize in Economic Sciences. When awarding the prize in 1970, the Swedish Royal Academies stated that he "h ...
's first doctoral student.
Early model-building
Klein then moved to the
Cowles Commission for Research in Economics
The Cowles Foundation for Research in Economics is an economic research institute at Yale University. It was created as the Cowles Commission for Research in Economics at Colorado Springs in 1932 by businessman and economist Alfred Cowles. In 193 ...
, which was then at the
University of Chicago
The University of Chicago (UChicago, Chicago, U of C, or UChi) is a private research university in Chicago, Illinois. Its main campus is located in Chicago's Hyde Park neighborhood. The University of Chicago is consistently ranked among the b ...
, now the
Cowles Foundation-->
Cowles Foundation
The Cowles Foundation for Research in Economics is an economic research institute at Yale University. It was created as the Cowles Commission for Research in Economics at Colorado Springs in 1932 by businessman and economist Alfred Cowles. In 1939 ...
. There he built a model of the
United States economy
The United States is a highly developed mixed-market economy and has the world's largest nominal GDP and net wealth. It has the second-largest by purchasing power parity (PPP) behind China. It has the world's seventh-highest per capita GDP ...
to forecast the development of business fluctuations and to study the effects of government economic-political policy. After
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
Klein used his model to correctly predict, against the prevailing expectation, that there would be an economic upturn rather than a
depression due to increasing consumer demand from returning servicemen.
Similarly, he correctly predicted a mild
recession
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...
at the end of the
Korean War
, date = {{Ubl, 25 June 1950 – 27 July 1953 (''de facto'')({{Age in years, months, weeks and days, month1=6, day1=25, year1=1950, month2=7, day2=27, year2=1953), 25 June 1950 – present (''de jure'')({{Age in years, months, weeks a ...
.
Klein briefly joined the
Communist Party
A communist party is a political party that seeks to realize the socio-economic goals of communism. The term ''communist party'' was popularized by the title of ''The Manifesto of the Communist Party'' (1848) by Karl Marx and Friedrich Engels. A ...
during the 1940s, which led to trouble years later.
At the
University of Michigan
, mottoeng = "Arts, Knowledge, Truth"
, former_names = Catholepistemiad, or University of Michigania (1817–1821)
, budget = $10.3 billion (2021)
, endowment = $17 billion (2021)As o ...
, Klein developed enhanced
macroeconomic model
A macroeconomic model is an analytical tool designed to describe the operation of the problems of economy of a country or a region. These models are usually designed to examine the comparative statics and dynamics of aggregate quantities such as ...
s, in particular the famous
Klein–Goldberger model with
Arthur Goldberger
Arthur Stanley Goldberger (November 20, 1930 – December 11, 2009) was an econometrician and an economist. He worked with Nobel Prize winner Lawrence Klein on the development of the Klein–Goldberger macroeconomic model at the University of ...
, which was based on foundations laid by
Jan Tinbergen
Jan Tinbergen (; ; 12 April 19039 June 1994) was a Dutch economist who was awarded the first Nobel Memorial Prize in Economic Sciences in 1969, which he shared with Ragnar Frisch for having developed and applied dynamic models for the analysis of ...
of the
Netherlands
)
, anthem = ( en, "William of Nassau")
, image_map =
, map_caption =
, subdivision_type = Sovereign state
, subdivision_name = Kingdom of the Netherlands
, established_title = Before independence
, established_date = Spanish Netherl ...
, later winner of the first economics prize in 1969. Klein differed from Tinbergen in using an alternative
economic theory
Economics () is the social science that studies the production, distribution, and consumption of goods and services.
Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...
and a different
statistical
Statistics (from German: ''Statistik'', "description of a state, a country") is the discipline that concerns the collection, organization, analysis, interpretation, and presentation of data. In applying statistics to a scientific, industria ...
technique.
McCarthyism and move to England
In 1954, Klein's brief membership in the Communist Party was made public
and he was denied tenure at the University of Michigan, in the wake of the
McCarthy era
McCarthyism is the practice of making false or unfounded accusations of subversion and treason, especially when related to anarchism, communism and socialism, and especially when done in a public and attention-grabbing manner.
The term origina ...
. Klein moved to the
University of Oxford
, mottoeng = The Lord is my light
, established =
, endowment = £6.1 billion (including colleges) (2019)
, budget = £2.145 billion (2019–20)
, chancellor ...
, and developed an economic model of the
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...
known as the
Oxford model with
Sir James Ball. Additionally, at the Institute of Statistics Klein assisted with the creation of the
British
British may refer to:
Peoples, culture, and language
* British people, nationals or natives of the United Kingdom, British Overseas Territories, and Crown Dependencies.
** Britishness, the British identity and common culture
* British English, ...
Savings Surveys, based upon the Michigan Surveys.
Return to the U.S.
In 1958 Klein returned to the U.S. to join the Department of Economics at the
University of Pennsylvania
The University of Pennsylvania (also known as Penn or UPenn) is a private research university in Philadelphia. It is the fourth-oldest institution of higher education in the United States and is ranked among the highest-regarded universitie ...
. In 1959 he was awarded the
John Bates Clark Medal
The John Bates Clark Medal is awarded by the American Economic Association to "that American economist under the age of forty who is adjudged to have made a significant contribution to economic thought and knowledge." The award is named after the ...
, one of the two most prestigious awards in the field of economics. In 1968 he became the
Benjamin Franklin
Benjamin Franklin ( April 17, 1790) was an American polymath who was active as a writer, scientist, inventor, statesman, diplomat, printer, publisher, and political philosopher. Encyclopædia Britannica, Wood, 2021 Among the leading inte ...
Professor of Economics and Finance at Penn.
Brookings-SSRC Project
In the early 1960s Klein became the leader of the major "Brookings-SSRC Project" to construct a detailed
econometric model Econometric models are statistical models used in econometrics. An econometric model specifies the statistical relationship that is believed to hold between the various economic quantities pertaining to a particular economic phenomenon. An econometr ...
to forecast the short-term development of the U.S. economy.
Wharton
Later in the '60s, Klein constructed the
Wharton Econometric Forecasting Model. This model, considerably smaller than the Brookings model, achieved a very good reputation for its analysis of business conditions, used to forecast fluctuations including national product, exports, investments, and consumption, and to study the effect on them of changes in taxation, public expenditure, oil price, etc.
In 1969 Klein founded
Wharton Econometric Forecasting Associates
Wharton Econometric Forecasting Associates, Inc (WEFA Inc) was an economics forecasting and consulting organization founded by Nobel Prize winner Lawrence Klein.
WEFA Inc was a spinoff of the Wharton School of the University of Pennsylvania, wher ...
or WEFA (now
IHS Global Insight), launching the econometric forecasting industry in the United States. Among his clients were
General Electric Company
The General Electric Company (GEC) was a major British industrial conglomerate involved in consumer and defence electronics, communications, and engineering. The company was founded in 1886, was Britain's largest private employer with over 250 ...
,
IBM, and
Bethlehem Steel Corporation
The Bethlehem Steel Corporation was an American steelmaking company headquartered in Bethlehem, Pennsylvania. For most of the 20th century, it was one of the world's largest steel producing and shipbuilding companies. At the height of its succ ...
. He was the initiator of, and an active research leader in their
LINK project, a consortium of model builders from many countries, which was also mentioned in his Nobel citation. The aim was to produce the world's first global economic model, linking models of many of the world's countries so that the effect of changes in the economy of one country are reflected in the other. LINK, which is now operated by the United Nations, is still meeting regularly, most recently in September 2018 in Santiago, Chile.
Klein served as a thesis advisor for numerous well-known economists including
E. Roy Weintraub in the late 1960s.
Later career
During the
1976 United States presidential election, Klein coordinated
Jimmy Carter
James Earl Carter Jr. (born October 1, 1924) is an American politician who served as the 39th president of the United States from 1977 to 1981. A member of the Democratic Party (United States), Democratic Party, he previously served as th ...
's economic task force. He declined an invitation to join Carter's administration. Klein has also been president of the
Econometric Society
The Econometric Society is an international society of academic economists interested in applying statistical tools to their field. It is an independent organization with no connections to societies of professional mathematicians or statisticians. ...
. the International Atlantic Economic Society (1989–1990), and the
American Economic Association (in 1977).
His Nobel citation concludes that "few, if any, research workers in the empirical field of economic science, have had so many successors and such a large impact as Lawrence Klein". However,
Christopher Sims
Christopher Albert Sims (born October 21, 1942) is an American econometrician and macroeconomist. He is currently the John J.F. Sherrerd '52 University Professor of Economics at Princeton University. Together with Thomas Sargent, he won the No ...
has criticized the assumptions underlying large macro-econometric models built by Klein (Sims, 1980). Also, many economists have questioned the suitability of estimation methods employed by large structural models and the usefulness of simple autoregressive models for approximating economic systems.
In his final years, he was constructing short range "current quarter models" that use current economic indicators to get a handle on the rate of economic growth during the current and next quarter. In contrast to earlier efforts to model the economy structurally and to use constant adjustments and judgmental estimates for the exogenous variables, these systems are deliberately automatic and mechanical, simply translating available information into a statistically best estimate of current conditions. This represents a very different tradition from his earlier model building and applications.
After formal retirement and until his death he was engaged in macro econometric model building high-frequency models that project the economy in a monthly, quarterly frame. A publication on high frequency model containing countries such as US,
China
China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
,
Russia
Russia (, , ), or the Russian Federation, is a List of transcontinental countries, transcontinental country spanning Eastern Europe and North Asia, Northern Asia. It is the List of countries and dependencies by area, largest country in the ...
,
India
India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the so ...
,
Brazil
Brazil ( pt, Brasil; ), officially the Federative Republic of Brazil (Portuguese: ), is the largest country in both South America and Latin America. At and with over 217 million people, Brazil is the world's fifth-largest country by area ...
,
Mexico
Mexico (Spanish: México), officially the United Mexican States, is a country in the southern portion of North America. It is bordered to the north by the United States; to the south and west by the Pacific Ocean; to the southeast by Guatema ...
,
Korea
Korea ( ko, 한국, or , ) is a peninsular region in East Asia. Since 1945, it has been divided at or near the 38th parallel, with North Korea (Democratic People's Republic of Korea) comprising its northern half and South Korea (Republic o ...
and
Hong Kong
Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China ( abbr. Hong Kong SAR or HKSAR), is a city and special administrative region of China on the eastern Pearl River Delt ...
was expected in 2008.
Klein was a founding trustee of
Economists for Peace and Security. He was also a member of the
American Academy of Arts and Sciences
The American Academy of Arts and Sciences (abbreviation: AAA&S) is one of the oldest learned societies in the United States. It was founded in 1780 during the American Revolution by John Adams, John Hancock, James Bowdoin, Andrew Oliver, and ...
, the
American Philosophical Society
The American Philosophical Society (APS), founded in 1743 in Philadelphia, is a scholarly organization that promotes knowledge in the sciences and humanities through research, professional meetings, publications, library resources, and communit ...
, and the United States
National Academy of Sciences
The National Academy of Sciences (NAS) is a United States nonprofit, non-governmental organization. NAS is part of the National Academies of Sciences, Engineering, and Medicine, along with the National Academy of Engineering (NAE) and the Nati ...
.
He died at the age of 93 in his home on October 20, 2013.
Publications
*
* Economic Fluctuations in the United States, 1921–41 (1950)
* An Econometric Model of the United States, 1929–52 (with AS Goldberger, 1955)
* The Keynesian revolution (1947)
**
* The Wharton Econometric Forecasting Model (with MK Evans, 1967)
* A Textbook of Econometrics (1973)
* The Brookings Model (With Gary Fromm. 1975)
* Econometric Model Performance (1976)
* An Introduction to Econometric Forecasting and Forecasting Models (1980)
* Econometric Models As Guides for Decision Making (1982)
* The Economics of Supply and Demand 1983
* Economics, Econometrics and The LINK (with M Dutta, 1995)
* China and India: Two Asian Economic Giants, Two Different Systems (2004). Article free downloadable at the journal Applied Econometrics and International Development http://www.usc.es/economet/aeid.htm
See also
*
List of economists
This is an incomplete alphabetical list by surname of notable economists, experts in the social science of economics, past and present. For a history of economics, see the article History of economic thought. Only economists with biographical artic ...
References
Further reading
*
*
*
* Sims, C. (1980). Marcoeconomics and reality. Econometrica, 48, 1-48.
External links
Lawrence KleinEconomists for Peace and Security*
*
*
*
*
{{DEFAULTSORT:Klein, Lawrence
1920 births
2013 deaths
20th-century American economists
21st-century American economists
American people of German-Jewish descent
American Nobel laureates
Distinguished Fellows of the American Economic Association
Econometricians
Economists from Nebraska
Fellows of the Econometric Society
Foreign Members of the Russian Academy of Sciences
Jewish American social scientists
Los Angeles City College alumni
Macroeconomists
Members of the United States National Academy of Sciences
MIT School of Humanities, Arts, and Social Sciences alumni
Neo-Keynesian economists
Nobel laureates in Economics
People from Omaha, Nebraska
Presidents of the American Economic Association
Presidents of the Econometric Society
Time series econometricians
University of California, Berkeley alumni
University of Michigan faculty
University of Pennsylvania faculty
Members of the American Philosophical Society