Dr. Klein was best known for his development of large-scale econometric models — a method that uses mathematics, statistics and economics to test economic hypotheses — and applying them to the analysis of future economic fluctuations and trends.
Building on the work that future Nobel laureate Jan Tinbergen had begun in the 1930s, Dr. Klein combined economic theory and statistics to estimate the effect of changes in government policies on future economic conditions.
Antonio M. Merlo, a professor in Penn’s economics department, said Dr. Klein’s work established a new paradigm of economics. Before his work, models captured only a few specific aspects of the economy.
Merlo said Dr. Klein devoted his life to developing and improving models to capture the statistical relationships of these various and intricate variables of the economy into one large-scale picture.
Those models allowed government policymakers as well as businesses and the general public to have a more mature view of what would happen next and how it would affect their livelihoods.
Dr. Klein’s work provided discipline to the field of economics, Merlo said, and was “sophisticated at the theoretical and technical level” but also “extremely applicable.”
Despite formidable challenges, including a lack of reliable data and underdeveloped computing and information technology, Dr. Klein was able to show how economic elements interact through a series of mathematical equations.
Early on, Dr. Klein correctly forecast, unlike many economists in the mid-1940s, that the United States would experience an economic upturn rather than a depression following the end of World War II because of pent-up demand for consumer goods and housing, as well as the purchasing power of returning soldiers.
His correct prediction increased the credibility of the field of econometrics. He also accurately predicted only a mild recession at the end of the Korean War.
The Nobel committee stated in its citation that “few, if any, research workers in the empirical field of economic science have had so many successors and such a large impact.”
Jointly, with his student Arthur Goldberger, he developed the Klein-Goldberger model, an early macroeconometric model that analyzed the nature of business cycles.
During the early 1960s, he co-directed a
brain trust of economists to develop the Brookings model. The model was, at that time, the largest and most ambitious short-run forecasting model of the American economy.
His work was also the forerunner of the statistical Wharton Models, the first large-scale commercial forecasting industry in the United States. The Wharton Models, named after the Wharton School of the University of Pennsylvania, found broad use in the market analysis of business fluctuations and forecasting gross national product, exports, investment and consumption.