Lawrence R. Klein dies at 93; won Nobel for economic forecasting models

October 24, 2013

Lawrence R. Klein, a Nobel Prize-winning economist who was credited with establishing economic forecasting models for the modern age, died Oct. 20 at his home in Gladwyne, Pa. He was 93.

The family confirmed the death but did not disclose the cause. He spent the majority of his career at the University of Pennsylvania as an economics professor.

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.


Lawrence R. Klein, a Nobel Prize-winning economist who was credited with establishing economic forecasting models for the modern age pictured here in 1981, died Oct. 20. He was 93. (B. Thumma/Associated Press)

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.

Additionally, the models correctly forecasted that the 1973 Arab oil embargo would result in a recession and higher inflation and that the 1981 Reagan tax cuts would increase the federal budget deficit, according to a 1984 Time magazine story.

Dr. Klein was the chief economic adviser to Jimmy Carter during his successful 1976 presidential campaign and remained an informal adviser to the president-elect during his transition period.

He reportedly turned down an offer to chair Carter’s Council of Economic Advisers to return to academia. He taught economics at the undergraduate and graduate levels at Penn for 33 years before he retired in 1991. While at Penn, he mentored more doctoral students and directed more doctoral dissertations per year than any other economics department member, Merlo said.

The son of an office clerk, Lawrence Robert Klein was born Sept. 14, 1920 in Omaha. As a youth, he dreamed of playing baseball professionally and was at one point a batboy for a minor-league team in Omaha. At 10, he was struck by a car and suffered a significant leg injury that prevented him from playing and from enlisting in the military during World War II.

Dr. Klein was a 1942 economics graduate of the University of California at Berkeley and, in 1944, was one of the first students to receive a PhD in economics at the Massachusetts Institute of Technology. At MIT, he completed his dissertation on Keynesian theory under the direction of future Nobel laureate Paul A. Samuelson.

He was then invited to join the econometrics team of the prestigious Cowles Commission at the University of Chicago, where then-director Jacob Marschak tasked him with reviving and modernizing Tinbergen’s econometric model.

He briefly worked on the staff of future Federal Reserve Chairman Arthur F. Burns at the National Bureau of Economic Research in Cambridge, Mass., before joining what is now the Survey Research Center of the University of Michigan in 1949. A year later, he published “Economic Fluctuations in the United States 1921-1941,” which established his expertise on the history, art and science of econometric modeling.

His name and brief membership in the Communist Party during the late 1940s surfaced in a 1954 House Un-American Activities Committee hearing, ultimately causing the University of Michigan to deny him tenured professorship. He later chalked up his Communist Party involvement to youthful naivete.

He moved to Britain and taught economics at the Oxford Institute of Statistics for four years until he received an offer in 1958 to join the economics faculty at the Wharton School. The next year, he received the John Bates Clark Medal, awarded every two years by the American Economic Association to the most promising economist under 40.

He established Wharton Econometric Forecasting Associates (acquired in 2008 by the Denver-based research firm IHS) and the International Economic Review, a quarterly peer-reviewed scientific journal produced by Penn and Osaka University in Japan.

During the 1960s, Dr. Klein worked with nations including Japan, Canada, Mexico and Israel to help develop their national economic models. Later, he integrated the independently developed national models into a world econometric model, Project LINK, which is used today by the United Nations and the University of Toronto for global forecasting of trade and capital movements.

“Globalization is here to stay; one cannot back away from that fact,” Dr. Klein said in 2005, “but today’s new order can be tapped for the advancement of the entire world economy through peaceful economic efforts.”

He was a founding trustee of what is now Economists for Peace and Security and past president of the American Economic Association and the Econometric Society. He was one of the first Western economic advisers appointed to the China’s State Planning Commission.

Survivors include his wife of 66 years, Sonia Adelson Klein of Gladwyne; four children, Hannah Klein of New York City, Rebecca Kennedy of Boston, Rachel Klein of Brooklyn and Jonathan Klein of Philadelphia; seven grandchildren; and four great-grandchildren.

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