WHO IS Theodore W. Schultz
Theodore W. Schultz, known as Ted Schultz, was born on April 30, 1902 and died February 26, 1998. He was an American Nobel Laureate, economist, and economics chair at the University of Chicago. He is most famous for developing the Human Capital Theory of economic recovery from disaster.
BREAKING DOWN Theodore W. Schultz
Theodore W. Schultz was born on a farm in South Dakota, where he attended school until the eighth grade, when his father pulled him out for fear that he would pursue his education further and leave the farm. Eventually Schultz would enroll in a special farm-oriented agricultural studies program at South Dakota State which only met for the winter months. 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 would be the editor of all of Schultz’s works until her death in 1991.
From 1930 to 1943, Schultz was a professor at Iowa State University, until the oleomargarine controversy over which interests economic policies should serve. He left in the wake of the controversy and went to the University of Chicago, where he was made Economics Chair in 1946. Schultz 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 by King Carl Gustaf XVI of Sweden.
Schultz’s Human Capital Theory
Schultz worked primarily on 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 concluded that the root cause was the healthy and educated populations of the two nations, a conclusion which eventually became the basis of Human Capital Theory. This led to a major shift in funding to education by the International Monetary Fund and the World Bank. To reach this conclusion he actually traveled to the various nations involved in his study, meeting with local farmers, village leaders, and workers.
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 they could not compete with price.