Who Was Theodore W. Schultz?
Theodore W. Schultz, who went by the name Ted Schultz, was born on April 30, 1902 and died on Feb. 26, 1998. He was an American Nobel Prize recipient, an economist, and the Chair of Economics at the University of Chicago. He is most famous for developing the Human Capital Theory of economic recovery from disaster.
- Theodore Schultz was an agricultural economist and the Chair of the Department of Economics at the University of Chicago.
- Schultz made significant contributions to the economics of rural and agricultural development and the theory of human capital.
- He was awarded the Nobel Prize in Economics in 1991.
Life and Career
Theodore W. Schultz was born on a farm in South Dakota. He attended school until the eighth grade when he left to work on his family's farm due to labor shortages during World War I. Later, motivated by the persistent financial troubles he saw around him in the agricultural sector, Schultz would enroll in a special farm-oriented agricultural and economic studies program at South Dakota State. He finally earned a degree in agriculture and economics in 1928 at the age of 26. Two years later, in 1930, he married Esther Werth, who was the editor of all of Schultz's works until her death in 1991.
Schultz was a professor at Iowa State University from 1930 to 1943. In 1943, a controversy about oleomargarine erupted with the question of whose interests economic policies should serve: consumers or producers. After the school suppressed research favorable toward oleomargarine under pressure from dairy producers, Schultz left his position at the university. Schultz went to the University of Chicago, where he would serve the remainder of his career (when he wasn't traveling internationally for research). He was made Chairman of the Economics Department in 1946 and served in that capacity until 1961. He attracted his friend and former student David Gale Johnson to Chicago, and together the pair made substantial contributions to doctrinal, ideological, and analytical economics, which attracted the support of several wealthy donors and charitable foundations, most notably the Rockefeller Foundation. He became the president of the American Economic Association in 1960. In 1979, he was awarded the Nobel Prize for Economics for his research on the role of human capital in economic development.
Throughout his career Schultz made a number of contributions to the advancement of economic science. These include his work on the agricultural economics of poor and developing nations and his human capital theory of economic development. In the course of his research, Schultz actually traveled to numerous nations to meet with local farmers, village leaders, and workers.
Agriculture in Developing Countries
Schultz extended his early applied work in agricultural economics to a global focus on the development of agricultural regions in relatively poor countries. He argued that economic stagnation across poor, rural, agricultural areas was largely due to government policies that favored richer urban areas over the interests of agriculture. Policies that restrain food and agricultural commodity prices, disproportionate taxation of crops and agricultural land, and the failure of many governments to support research and extension services all suppress rural entrepreneurship and reduce the incentive and ability of farmers to engage in innovation and investment in agriculture, according to Schultz.
Human Capital and Economic Recovery
Schultz noted the remarkable speed with which the post-war economies of Japan and West Germany rebounded from the complete devastation resulting from World War II, especially in comparison to the relatively intact economic infrastructure of the United Kingdom, which suffered a severe economic depression for several years after the war. Schultz determined that foreign aid from the Marshall Plan was actually damaging local economies in Europe, because while aid was distributed for free, local economies were distorted and smothered because free and subsidized aid suppressed prices leaving local farmers unable to compete.
Schultz concluded that the root cause of Germany's and Japan's success was the healthy and educated populations of the two nations, a conclusion which eventually became the basis of Human Capital Theory. This led him to emphasize the quality of the population as a key factor in economic growth and development over the quality or quantity of land or other natural resource endowments. This led to a major shift in the funding of education and health promotion programs by international institutions such as the International Monetary Fund and the World Bank.