Author: By David Warsh Globe Staff

Date: Thursday, October 16, 1980
Page: ?????
Section: RUN OF PAPER

At Cowles, the cradle of econometrics, there was none of the heavy security of an atomic-bomb project. There was just a bunch of kids with adding machines, led by a European exile named Jacob Marschak.

Among them: Tjalling Koopmanns, Kenneth Arrow, Herbert Simon and Lawrence Klein, all to be winners of the Nobel Prize. Larry Klein's award, which came yesterday, was a surprise to no one.

In the traditional ceremony of champagne after breakfast, Klein stood in front of his class at the University of Pennsyvania yesterday and said he had never dreamed he could accomplish so much with mathematical models, the long chains of equations whose solutions are supposed to predict the behavior of the world's economy.

Where Klein had begun his work in Chicago 36 years before, over the door of the social sciences building, was carved a dictum of Lord Kelvin, the 19th century English physicist:

"When you can measure what you are speaking about, and express it in numbers, you know something about it; when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the stage of science. . . ."

It was for his contribution to the infusion of sophisticated measurement techniques into economics that Klein won his prize. Starting in the early 1930s, the Cowles Commission - a foundation sponsored by a wealthy Denver businessman - was charged with exploring the possibility of mathematically describing and predicting the course of economic events. It was something Alfred Cowles 3d had heard suggested in Europe, before the war.

Yesterday's prize to Klein was the second to be given for econometric modeling. The other was the first Nobel ever given in economics, awarded in 1969 to Jan Tinbergen and Ragnar Frisch. Tinbergen constructed the first such model in 1937.

In Chicago in 1944, Klein and the others followed closely on Tinbergen's footsteps, expanding the work. Ken Arrow theorized and Tjalling Koopmans worked on statistical methods; but it was Klein who learned how to put the equations together in models. Herbert Simon, though not on the commission staff, was a regular visitor; he was full of ideas about new tools called "computers."

"The group was close in the form of personal contact and friendship," Koopmanns said in a telephone interview yesterday. "It wasn't that we were trying to be Bohemian or anything like that. There was quite a sense of closeness, of opportunity to make a real contribution."

Down the hall from where they were working was the University of Chicago economics department, an uneasy host to the Cowles project. The department chairman was Theodore Schultz, who later won the Nobel Prize for his work in agriculture; the newest member of the faculty was Milton Friedman, who later won the Nobel for his work on monetary economics.

But the university's tradition was in literature and humanities, not mathematics. Econometrics, as it was being called, didn't stick. First Klein, then Arrow and finally Koopmanns left. The Cowles foundation departed with them and found a home, with Koopmanns, at Yale.

Klein's first econometric model enabled him to predict an upsurge in postwar economic activity, instead of the depression expected by most economists, including the man who trained him - Paul Samuelson of MIT, still another Nobel winner.

Klein went to England and built a model of that country's economy before returning to the United States, where he went to the University of Michigan and then to the University of Pennsylvania.

There were only slide rules when Tinbergen invented his first model; Klein was born in 1920, on the eve of the computer age. During the 1950s, he build successively more complex systems of equations to use the record of past events to predict future ones, and he cranked them into the increasingly advanced computers that were being made.

"He really did two things, each one of which is worthy of the prize," Harvard's Otto Eckstein said yesterday. "First, he brought econometric modeling to this country. He was virtually alone through the 1950s. . . . From 1945 to 1965, he was almost alone. Then other people began to come on galore."

"Then, in the 1970s, he went through another major round of work, on Project LINK, linking up international models, a couple of dozen of them." To be sure, Eckstein said, with the LINK model of the world economy still in its infancy, "it's harder to identify the specific scientific progress." But "linking all these models together certainly is a major scientific idea," he added.

Klein's work has been primarily nonpolitical. In 1945, however, while at the University of Chicago, he had a minor flirtation with Marxism. In 1976, he had another brush with politics when he served as a senior adviser to Jimmy Carter when he was running for President.

After Carter was elected, Klein turned down the top economic job in the Administration because, he explained, in government "you're always working on yesterday's problems."

Not for Klein. A couple of years ago he was invited by the Chinese government to develop a model of its economy. Traveling to China frequently to do that, he has become, at age 60, one of the leading authorities on the Chinese macroeconomy.

WARSH ;10/15,16:13 MFEENE;10/17,12 B07981333