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Lawrence Robert Klein (September 14, 1920 – October 20, 2013) was an American economics. For his work in creating to forecast economic trends in the field of econometrics in the Department of Economics at the University of Pennsylvania, he was awarded the Nobel Memorial Prize in Economic Sciences 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 . Harvard University professor Martin Feldstein told the Wall Street Journal that Klein "was the first to create the statistical models that embodied Keynesian economics," tools still used by the Federal Reserve Bank and other central banks.
Klein briefly joined the Communist Party during the 1940s, which led to trouble years later.
At the University of Michigan, Klein developed enhanced macroeconomic models, in particular the famous Klein–Goldberger model with Arthur Goldberger, which was based on foundations laid by Jan Tinbergen of the Netherlands, later winner of the first economics prize in 1969. Klein differed from Tinbergen in using an alternative economic theory and a different statistics technique.
In 1969 Klein founded Wharton Econometric Forecasting Associates or WEFA (now IHS Global Insight), launching the econometric forecasting industry in the United States. Among his clients were General Electric Company, IBM, and Bethlehem Steel Corporation. He was the initiator of, and an active research leader in their Project 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. The LINK modeling system was transferred from University of Pennsylvania to the United Nations Secretariat at New York in 1989 and Klein remained as the intellectual leader of the project until 2013 when he passed away. Project LINK continued at the United Nations until 2020.
Klein served as a thesis advisor for numerous well-known economists including E. Roy Weintraub in the late 1960s.
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 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 within a short timeframe (e.g., monthly or quarterly). A publication on high frequency model containing regions such as US, China, Russia, India, Brazil, Mexico, Korea and Hong Kong 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 Philosophical Society, and the United States National Academy of Sciences.
He died at the age of 93 in his home on October 20, 2013.
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