Schultz, Theodore William

▪ 1999

      American economist (b. April 30, 1902, near Arlington, S.D.—d. Feb. 26, 1998, Evanston, Ill.), popularized the study of agricultural economics, especially as it applied to less-developed nations. Using classical methods, he showed how farmers played an important part in the industrialization of their nation. He was best known for his recognition of "human capital"—education, incentive, and personal talent—as a leading factor of economic production, and he developed a theory of investment based upon it. In this regard he was viewed as a bridge to modern economists such as Gary S. Becker, who studied human behaviour. Owing to a labour shortage during World War I, Schultz never attended high school but matriculated at South Dakota State College (now University) in 1924. After receiving bachelor's and master's degrees in 1927, he attended the University of Wisconsin (Ph.D., 1930) under noted labour economist John R. Commons. After graduation Schultz joined Iowa State College (now University) in the department of economics, which he transformed into one of national renown, recruiting such talented faculty as John Kenneth Galbraith. During his tenure he successfully prevented the college administration from censoring a colleague's paper that angered a major business interest, but the bitter row prompted his decision to leave in 1943 for the University of Chicago. As head (1946-61) of Chicago's vaunted economics department, he unified the disparate group even as he simultaneously encouraged independent thinking. While on faculty he toured many agriculture-based countries and published Agriculture in an Unstable Economy (1945), The Economic Value of Education (1963), and Economic Growth and Agriculture (1968). In 1979 he was awarded the Nobel Prize for Economics, which he shared with Sir Arthur Lewis of Great Britain. Schultz remained active in academic life for two decades after his formal retirement in 1970. He continued to write books, among them Investment in Human Capital (1971) and Investing in People: The Economics of Population Quality (1981).

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▪ American economist

born April 30, 1902, near Arlington, South Dakota, U.S.

died February 26, 1998, Evanston, Illinois

      American agricultural economist whose influential studies of the role of “human capital”—education, talent, energy, and will—in economic development won him a share (with Sir Arthur Lewis (Lewis, Sir Arthur)) of the 1979 Nobel Prize for Economics.

      Schultz graduated from South Dakota State College in 1927 and earned his Ph.D. in 1930 at the University of Wisconsin, where he was influenced by John R. Commons (Commons, John R.) and other reform-minded thinkers. He taught at Iowa State College (1930–43) and at the University of Chicago (1943–1972), where he was head of the economics department from 1946 to 1961.

      In Transforming Traditional Agriculture (1964), Schultz challenged the prevailing view, held by development economists, that farmers in developing countries were irrational in their unwillingness to innovate. He argued that, to the contrary, the farmers were making rational responses to high taxes and artificially low crop prices set by their governments. Schultz also noted that governments in developing countries lacked the agricultural extension services critical for training farmers in new methods. He viewed agricultural development as a precondition for industrialization.

      As an empirical economist, Schultz visited farms when he traveled to gain a better understanding of agricultural economics. After World War II, he met an elderly and apparently poor farm couple who seemed quite content with their life. He asked them why. They answered that they were not poor; earnings from their farm had allowed them to send four children to college, and they believed that education would enhance their children's productivity and, consequently, their income. That conversation led Schultz to formulate his concept of human capital, which he concluded could be studied by using the same terms applied to nonhuman capital. Human capital, however, could be expressed in the form of productive knowledge.

      Among his publications were Agriculture in an Unstable Economy (1945), The Economic Value of Education (1963), Economic Growth and Agriculture (1968), Investment in Human Capital (1971), and Investing in People: The Economics of Population Quality (1981).

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