Awarded the Nobel Prize for Economic Sciences in 1980. This was for his work in creating computer models to forecast economic trends in the field of econometrics at the University of Pennsylvania. Specifically "for the creation of economic models and their application to the analysis of economic fluctuations and economic policies." Thanks to his work such models became widespread among economists.
Professor Klein is a graduate of the University of California, Berkeley, where he began his computer modeling, and gained his PhD at the Massachusetts Institute of Technology (MIT) in 1944.
After MIT Klein moved to the Cowles Commission for Research in Economics, which was then at the University of Chicago, now the Cowles Foundation. Here he built a model of the United States economy to forecast the development of business fluctuations and to study the effects of government economic-political policy. After World War II Klein correctly predicted, against the prevailing expectation and using his model, that there would be an economic upturn rather than a depression. Similarly, he correctly predicted a mild recession at the end of the Korean War.
At the University of Michigan, Klein developed enhanced economic models, in particular the famous Klein-Goldberger model with Arthur Goldberger, which was based on foundations laid by Professor Jan Tinbergen of the Netherlands, later winner of the first economics prize in 1969. Klein differed from Tinbergen by using an alternative economic theory and a different statistical technique.
Klein moved to England in 1954. This was prompted by Senator Joseph McCarthy's anti-communist "witch-hunt", and the fact that his continuing tenure at Michigan was denied him. Klein had been a member of the American Communist Party in 1946 and 1944 while in Chicago; he later said that this was the result of youthful naivete.
In England, Klein developed a model of the United Kingdom economy at the University of Oxford, before returning to the USA in 1958 to join the Department of Economics at the University of Pennsylvania, then became "Benjamin Franklin Professor of Economics and Finance" at their Wharton Business School in 1968.
At the beginning of the 1960's Klein became the leader of the major "Brookings-SSRC Project", to construct a detailed econometric model to forecast the short-term development of the American economy.
Later in the 60's, 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.
Professor Klein founded Wharton Econometric Forecasting Associates or WEFA, (now Global Insight). At the end of the 1960s he was initiator and an active research leader in their LINK project, which was also mentioned in his Nobel citation. The aim of this 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 other countries.
In 1976 Klein was coordinator of Jimmy Carter's economic task force before the US presidential election. He declined an invitation to join Carter's administration, but was a member of the President's Council of Economic Advisers between 1977 and 1980. Klein has also been president of the Econometric Society 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".
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Klein's publications include:
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