The Elgar Companion to John Maynard Keynes
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The Elgar Companion to John Maynard Keynes

Edited by Robert W. Dimand and Harald Hagemann

The most influential and controversial economist of the twentieth century, John Maynard Keynes was the leading founder of modern macroeconomics, and was also an important historical figure as a critic of the Versailles Peace Treaty after World War I and an architect of the Bretton Woods international monetary system after World War II. This comprehensive Companion elucidates his contributions, his significance, his historical context and his continuing legacy.
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Chapter 72: Lawrence R. Klein

Robert W. Dimand

Abstract

The Keynesian Revolution (1947), by 1980 Nobel laureate Lawrence Klein, established the concept of a Keynesian revolution in economics, as distinct from an evolutionary development of earlier theories. Klein initially wrote the book as his doctoral dissertation at the Massachusetts Institute of Technology, where he was the first PhD student in economics and finished graduate school in two years. Subsequently, at the Cowles Commission and at the universities of Michigan, Oxford and Pennsylvania, Klein was the pioneer and outstanding figure in large-scale, simultaneous-equation, structural macroeconomic modelling, from Klein Model I in his Cowles monograph through the Klein-Goldberger, Brooking and Wharton models of the US economy and models of British, Japanese and other economies through to Project LINK, which linked structural macroeconometric models of national economies to model the world economy. Klein responded vigorously to criticism from T.C. Liu that the equations of large structural models could not be identified because there are not enough truly exogenous variables and from Robert Lucas that structural models cannot be used for policy evaluation because the parameters have been estimated with data from a given policy regime.

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