Theodore Schultz | |
|---|---|
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| Born | (1902-04-30)April 30, 1902 Arlington, South Dakota, U.S. |
| Died | 26 February 1998(1998-02-26) (aged 95) Evanston, Illinois, U.S. |
| Academic background | |
| Education | South Dakota State University University of Wisconsin-Madison |
| Academic work | |
| Discipline | Agricultural economics |
| School or tradition | Chicago school of economics |
| Institutions | Iowa State University University of Chicago |
| Awards | Nobel Memorial Prize in Economic Sciences (1979) |
| Website | |
Theodore William Schultz (/ʃʊlts/SHUULTS; 30 April 1902 – 26 February 1998) was an Americanagricultural economist and chairman of the University of Chicago Department of Economics. Schultz rose to national prominence after winning the 1979Nobel Memorial Prize in Economic Sciences.
Theodore William Schultz was born on April 30, 1902, in a small town ten miles northwest ofBadger, South Dakota, on a 560-acre farm. When Schultz was in the eighth grade, his father Henry decided to pull him out of attending Kingsbury County Schoolhouse. His father's view was that if his eldest son continued to get an education he would be less inclined to continue working on the farm. Schultz subsequently did not have any formal post-secondary education.
He eventually enrolled in the Agriculture College atSouth Dakota State, in a three-year program that met for four months a year during the winter. After being recognized for possessing great potential as a student, Schultz moved on to a bachelor's program, earning his degree in 1927 in agriculture and economics. He also received an honorary doctorate of science degree from the college in 1959. He graduated in 1927, then entered theUniversity of Wisconsin–Madison earning his doctorate in Agricultural Economics in 1930 under Benjamin H. Hibbard with a thesis, titledThe Tariff in Relation to the Coarse-Feed Grains and a Development of Some of the Theoretical Aspects of Tariff Price Research.[1]
Schultz taught atIowa State College from 1930 to 1943.[2]He left Iowa State in the wake of the "oleomargarine controversy",[3] and he served as the chair of economics at theUniversity of Chicago from 1946 to 1961. He became a member of theAmerican Academy of Arts and Sciences in 1958,[4] theAmerican Philosophical Society in 1962,[5] and the United StatesNational Academy of Sciences in 1974.[6] He became president of theAmerican Economic Association in 1960. He retired in 1970 though he remained active at the University of Chicago into his 90s until a fractured hip left him bedridden.[7]
Shortly after his move to Chicago, Schultz recruited his former student,D. Gale Johnson to the department. Their research in farm andagricultural economics was widely influential and attracted funding from theRockefeller Foundation to the agricultural economics program at the university. Among the graduate students and faculty affiliated with the pair in the 1940s and 1950s wereClifford Hardin,Zvi Griliches,Marc Nerlove, andGeorge S. Tolley.[8] In 1979, Schultz was awarded the Nobel Prize in Economics for his work inhuman capital theory andeconomic development.
While he was chair of economics at Chicago he led research into why post-World War IIGermany andJapan recovered, at almost miraculous speeds, from the widespread devastation. Contrast this with theUnited Kingdom which was still rationing food long after the war. His conclusion was that the speed of recovery was due to a healthy and highly educated population; education makes people productive and good health care keeps the education investment around and able to produce. One of his main contributions was later calledHuman Capital Theory, which he formulated with the help ofGary Becker andJacob Mincer.[9] Schultz coined this theory in his book titled Investment in Human Capital; however, he experienced negative feedback from other economists. He states that knowledge and skill are a form of capital, and investments in human capital leads to an increase in both economic output and workers' earnings. Many economists refused to support his theory of considering humans as a form of capital due to slavery, which at the time was an understandable critique given the civil rights movements at this time. Schultz argues that his theory does not dismiss humanity but instead encourages individuals to invest in themselves. He advocates for humans to invest in their health, internal migration, and on-the-job training; however, he focuses on encouraging individuals to better their education in order to increase their level of productivity.[10] He states that if people were to do these things, they would have many more opportunities available for them to better their economic situations.
He also inspired much work ininternational development in the 1980s, motivating investments in vocational and technical education byBretton Woods systemInternational Financial Institutions such as theInternational Monetary Fund and theWorld Bank. During his research Schultz got down to details and went out among the poor farming nations of Europe, talking to farmers and political leaders in small towns. He was "not afraid to get his shoes a little muddy." He noticed that the aid the United States sent in the form of food or money was not only of little help but actually harmful to such nations, as the farmers and agricultural producers within those nations were not able to compete with the free prices of the "aid" sent and therefore they were not able to sustain themselves or invest the money they made from crops back into the economy. He theorized that if the U.S. instead used its resources to help educate these rural producers and provide them with technology and innovations they would be more stable, productive and self-sustaining in the long run. This was another key part of his work "Investment in Human Capital".
One of Theodore Schultz's major contributions to economic theory is his theory outlined in his book Transforming Traditional Agriculture which was published in 1964. This theory combats a popular thought at the time held among development economists that the unwillingness of farmers of poor underdeveloped countries to innovate and expand their agricultural sectors was an irrational decision. Schultz argued that the farmers in these poor underdeveloped countries are making the most rational decision to not innovate or expand the agricultural sector because of high taxes and artificially low agriculture prices set by their governments. Schultz stated that in these poor underdeveloped countries resources were already being perfectly allocated and agriculture was already efficient. Despite these two things farmers in these countries were still poor, so the only solution to this problem was the transformation of their traditional agriculture system. Schultz argued that the best change to make for these poor underdeveloped countries to make was to replace all old inputs with new more profitable inputs. He stated the best way to do this was with a market approach where farmers were left free to decide which changes in the factors of production would be made. With this approach they would be free to try out any new innovations in technology and change in crops they decide to grow in pursuit of profits with very limited government intervention.[11]
Schultz was awarded the Nobel Prize jointly withSir William Arthur Lewis in 1979 for his work indevelopment economics, focusing on theeconomics of agriculture. He analyzed the role of agriculture within the economy, and his work has had far reaching implications forindustrialization policy, both in developing and developed nations. Schultz also promulgated the idea ofeducational capital, an offshoot of the concept ofhuman capital, relating specifically to the investments made in education.[12]
Schultz married Esther Florence Werth (1905–1991) in 1930. She was born and raised on a farm nearFrankfort, South Dakota, ofGerman parents, who encouraged her to pursue schooling. Werth was the first in her family to attend college, receiving a bachelor's degree in commercial science fromSouth Dakota State College inBrookings in 1927,[13] and subsequently worked as a school teacher inWaubay, South Dakota, from 1927 to 1929 and then inGregory, South Dakota, from 1929 to 1930. Werth shared Schultz's background in agriculture and commitment to ideals of education and economic development, and throughout his career worked as a primary editor of his published works. In his Nobel Prize Lecture, he acknowledged her contributions thus: "I am also indebted to my wife, Esther Schultz, for her insistence that what I thought was stated clearly was not clear enough." The couple was survived by two daughters and one son.
Schultz received eight honorary degrees in his career. He had the distinction of being the firstSouth Dakota State University graduate and the second South Dakotan to win a Nobel Prize afterErnest Lawrence winner of the 1939 Nobel Prize for Physics. Between 2012 and 2013, South Dakota State University built the Theodore W. Schultz Hall, a residence hall for students pursuing degrees in agriculture.[14]Schultz also was awarded the Francis A. Walker Medal in 1972, which is the highest award given out by the American Economic Association.[9]
Schultz died inEvanston, Illinois, on February 26, 1998, at the age of 95. He is interred at Badger Cemetery inBadger, South Dakota.
The dominant social thought shapes the institutionalized order of society...and the malfunctioning of established institutions in turn alters social thought.
— Theodore W. Schultz (1977)[15]
Most people in the world are poor. If we knew the economy of being poor, we would know much of the economics that really matter.[16]
Farmers the world over, in dealing with costs, returns and risks, are calculating economic agents. Within their small, individual, allocative domain, they are fine-tuning entrepreneurs, tuning so subtly that many experts fail to recognize how efficient they are. – Theodore W. Schultz 1980[17]
///"the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1979Theodore W. Schultz, Sir Arthur Lewis". Nobelprize.org. RetrievedOctober 3, 2012.
| Awards | ||
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| Preceded by | Laureate of the Nobel Memorial Prize in Economics 1979 Served alongside:Sir Arthur Lewis | Succeeded by |
