Lawrence Klein, Nobel Winner for Econometric Models, Dies at 93; Economist Applied Forecasting Models to the Real World

Nobel-Winning Economist Applied Forecasting Models to the Real World

BRENDA CRONIN

Updated Oct. 21, 2013 8:13 p.m. ET

Lawrence R. Klein was the father of modern economic forecasting, which melds economics with statistics in an attempt to predict the future. Mr. Klein, who died Sunday at age 93, was the recipient of the 1980 Nobel Prize in economics for his pioneering work on econometric models. He ushered forecasting from academia into the realm of business, said Nariman Behravesh, chief economist of IHS Global Insight, the firm that ultimately evolved from the groundbreaking forecasting operation founded by Mr. Klein.Mr. Klein “was the first to create the statistical models that embodied Keynesian economics, an important influential tool that is still used by the Federal Reserve and other central banks, as well as by private forecasters,” Harvard professor Martin Feldstein said Monday.

A promising economist from a young age, Mr. Klein correctly predicted that the U.S. economy would prosper after World War II thanks to increased consumer demand, rather than return to recession as some economists feared. The prediction helped lend credibility to econometric modeling, then in an early stage of development.

Building on the findings of European economists Ragnar Frisch and Jan Tinbergen—who won the Nobel Prize in economics in 1969—Mr. Klein launched the econometric-forecasting industry in the U.S. by establishing Wharton Econometric Forecasting Associates.

He “early on figured out commercial applications,” Mr. Behravesh said. The firm’s early clients included General Electric Co., International Business Machines Corp. IBM -0.53% , Bethlehem Steel Corp. and Standard Oil Co. of New Jersey.

His computer-driven models, some of which now factor in almost 2,000 economic variables, are used today by the International Monetary Fund, the World Bank and other institutions, Mr. Behravesh said.

A native of Omaha, Neb., Mr. Klein received a Ph.D. from the Massachusetts Institute of Technology in 1944. He held teaching posts at the University of Chicago and University of Michigan, and did economic research for the U.S. government and the Brookings Institution.

After it was revealed in 1954 that he was briefly a member of the Communist Party in the 1940s, Mr. Klein moved to England and joined the Oxford Institute of Statistics.

He served as an adviser to Eugene McCarthy in the 1968 presidential election and to candidate Jimmy Carter in 1976.

In addition to winning the Nobel Prize, Mr. Klein was the recipient in 1959 of the John Bates Clark Medal, an award from the American Economic Association for contributions by an economist under age 40. In his Nobel citation, the prize committee stated 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.”

He later served as president of the American Economic Association. Awards in his name are presented annually by the U.S. Bureau of Labor Statistics and Arizona State University’s business school.

At his death, Mr. Klein was Benjamin Franklin Professor Emeritus of Economics at the University of Pennsylvania.

Lawrence Klein, Nobel Winner for Econometric Models, Dies at 93

Lawrence Klein, the University of Pennsylvania economist who won the 1980 Nobel Prize for his computer-based models that help governments forecast the future and act accordingly, has died. He was 93.

He died on Oct. 20 at his home in Gladwyne, Pennsylvania, according to the New York Times, citing his daughter, Hannah Klein.

The Royal Swedish Academy of Sciences awarded Klein the 1980 Nobel in economics “for the creation of econometric models and the application to the analysis of economic fluctuations and economic policies.” His Wharton Models, named for the University of Pennsylvania’s Wharton School, became widely used by nations and regions to predict gross national product, exports, investment and consumption, as well as the potential impact of government policies.

“Thanks to Klein’s contributions,” the Nobel committee said, econometrics — the use of mathematics, statistics and theory to forecast fluctuations in business and the economy — “is now to be found all through the world, not only at scientific institutions but also in public administration, political organizations and large enterprises.”

A former graduate student under Paul Samuelson at Massachusetts Institute of Technology, Klein taught at Penn for 33 years. One of his earliest models, in 1946, predicted that the end of World War II wouldn’t send the U.S. economy back into depression, which was a widespread fear, according to a 1980 article in Time magazine. Klein’s correct call helped win respectability for econometric models, Time said.

Presidential Adviser

Klein was chief economic adviser to Jimmy Carter during his successful 1976 presidential campaign, then returned to academia rather than take a position in the new administration. In declining an appointment, he avoided controversy over his brief membership, in the 1940s, in the Communist Party.

“I have always believed that people have misjudged the accuracy of economic forecasting,” Klein wrote in an autobiography for the Nobel Foundation. In real-life tests such as the aftermath of wars, shifts in government economic policy and recessions, “econometric models outperformed other approaches,” he said.

Lawrence Robert Klein was born on Sept. 14, 1920, in Omaha, Nebraska, the second of three children of Leo and Blanche Klein, who worked for a wholesale grocer, according to a 1980 article in the New York Times. Growing up during the Great Depression “was to have a profound impact on my intellectual and professional career,” he wrote.

Samuelson’s Student

He earned his undergraduate degree from the University of California-Berkeley in 1942, then moved to MIT in Cambridge, Massachusetts, for his doctoral studies under Samuelson — “the rising star of the period,” as he recalled. He got his Ph.D. in 1944.

He joined the econometrics team at the Cowles Commission of the University of Chicago, worked on modeling in Canada, visited economists in Europe, then returned to the U.S. to work at the National Bureau of Economic Research.

At the University of Michigan from 1950 to 1954, he lectured in economics and worked in its Survey Research Center to construct an influential business-forecasting model with his student, Arthur Goldberger.

After four years at Oxford University’s Institute of Statistics, where he built an economic model for the U.K., he moved to Philadelphia to join the faculty at Penn.

The American Economic Association awarded him the John Bates Clark Medal in 1957.

Wharton Econometrics

In the 1960s, Klein worked on econometric forecasting models first for the Brookings Institution and the Social Science Research Council, then for Penn’s Wharton School. The latter model became the foundation for Wharton Econometric Forecasting Associates Inc., a non-profit organization created to support the university’s economics department.

Klein also worked on models for nations including Japan, Israel and Mexico. Project Link, an effort he founded in 1969 to coordinate economic forecasting around the globe, now operates under the auspices of the United Nations and the University of Toronto.

Klein taught at Penn until 1991, when he became a professor emeritus. He continued his work at Wharton Econometrics, now part of IHS Global Insight Inc. He helped found Economists Against the Arms Race, now known as Economists for Peace and Security.

In addition to his daughter Hannah, survivors include his second wife, the former Sonia Adelson; daughters Rebecca Kennedy and Rachel Klein; a son, Jonathan Klein; and seven grandchildren and four great-grandchildren, according to a death notice on the website of Joseph Levine & Sons funeral home in Philadelphia.

To contact the reporter on this story: Laurence Arnold in Washington at larnold4@bloomberg.net