Theodore SchultzCharles Hutchinson Distinguished Service Professor Emeritus in Economics Theodore Schultz, a Nobel prize-winning economist who helped pioneer the study of the connections between education and national wealth, died Feb. 26 at the Presbyterian Home in Evanston. He was 95.
Schultz, the Charles Hutchinson Distinguished Service Professor Emeritus in Economics, made significant contributions to understanding agriculture in the United States and in developing nations. But his contribution to economics went far beyond that of agricultural economics.
In a 1958 paper, "The Emerging Economic Scene and Its Relation to High School Education," Schultz first wrote about the connections between education and productivity. At the time, other economists were having trouble explaining how the economies of such nations as Germany and Japan grew so quickly after World War II. Some economists attributed the improvements in those nations and others to "technical change," but Schultz identified people as the source of the economic growth.
Schultz was the first economist to systematize "how investments in education can affect productivity in agriculture as well as the economy as a whole," according to his 1979 Nobel citation. He was often a critic of developing nations' efforts to expand industrialization at the neglect of agriculture development.
By being able to show that economic growth depended on "human capital," Schultz opened a whole new area of research and paved the way for work by other economists, including fellow Nobel Prize winner Gary Becker, University Professor in Economics.
"Schultz was the leader in introducing the importance of education and skills to the modern economy and to the process of development," said James Heckman, the Henry Schultz Distinguished Service Professor in Economics. "He was also a major figure in transforming the vision of the development process away from state planning approaches and toward incentive-based schemes. "The most remarkable of all of his traits was his openness to ideas and his belief that economics was an empirical field -- one that learned from data and the real world and one that contributed knowledge to it," Heckman added. "He was not a hothouse intellectual -- he went out in the world and learned from it and shaped it. He had 'mud on his boots' as the agricultural economists put it -- real practical experience and a pragmatic vision."
Schultz began his work on economic growth at Chicago, where he published Food for the World (1945), a collection of papers presented at a conference, and Transforming Traditional Agriculture (1964), which was "the culmination of years of experience and reflection on problems of agriculture and development in the poorer nations together with his new thinking about investments in human being," said Mary Jean Bowman, Professor Emeritus in Economics in an article reviewing Schultz's work.
The book demonstrated that farmers in developing countries, with little or no education, are rational men who are unwilling to accept extremely risky and unproved improvements poorly fitted for their situations, Bowman said. The so-called "green revolution," which introduced new and profitable varieties of grain, provided farmers an opportunity to maximize returns on their efforts and accordingly was rapidly adopted.
"The rapid adoption in the 1960s of new, high-yielding varieties of rice and wheat was fully consistent with his conclusions," said D. Gale Johnson, the Eliakim Hastings Moore Distinguished Service Professor Emeritus in Economics and a fellow scholar of agricultural economics.
Schultz also expanded understanding of agriculture in the United States, emphasizing the role of economic theory in the study of agricultural economics. Until his work on the faculty of Iowa State College (now Iowa State University) in the 1930s, much of the research in agricultural economics focused largely on issues such as farm management, marketing and credit, without much reference to other area of economics.
"In the late 1930s and the 1940s, Schultz turned his attention to the analysis of agricultural policies," said Johnson. "The many New Deal agricultural programs provided numerous research opportunities, and one important interest was to determine the effects of particular programs, such as acreage limitations, upon actual output of farm products."
Schultz's interest in the rigorous, quantitative study of agricultural economics led to his move to Chicago in 1943. During World War II he oversaw a series of studies on wartime farm production, including a study that emphasized the resource savings that could be realized if margarine were used as a substitute for butter. Dairy farmers forced Iowa State to withdraw the pamphlet and Schultz left for the University of Chicago over the issue of academic freedom.
He continued to be interested in agricultural policies and in 1978 published Distortion of Agricultural Incentives, which explored the adverse impact of food and agricultural policies in developing countries on the growth of agricultural production.
Schultz was born in 1902 on a farm near Arlington, S.D. He never attended high school, but was admitted directly into college. He received his B.S. from South Dakota State College in 1926, his Ph.D. in 1930 from the University of Wisconsin, and he became a faculty member at Iowa State College in 1930.
At Chicago, he was Chairman of Economics from 1946 to 1961 and was named the Charles Hutchinson Distinguished Service Professor in 1952. He became Professor Emeritus in 1970.
Survivors include daughters Elaine Glickman of Winnetka and Margaret Schultz of Chicago; a son, T. Paul Schultz of Madison, Conn. ; three brothers and a sister; six grandchildren; and three great-grandchildren. Memorial donations may be made in his name to the Department of Economics. A memorial service will be held May 5.