Theodore Schultz

Last updated
Theodore Schultz
Theodore Schultz.jpg
Born(1902-04-30)April 30, 1902
Arlington, South Dakota, United States
Died26 February 1998(1998-02-26) (aged 95)
Evanston, Illinois, United States
Field Agricultural economics
School or
Chicago school of economics
Alma mater
Awards Nobel Memorial Prize in Economic Sciences (1979)
Information at IDEAS / RePEc

Theodore William Schultz ( /ʃʊlts/ ; 30 April 1902 – 26 February 1998) was an American economist and chairman of the University of Chicago Department of Economics. Schultz rose to national prominence after winning the 1979 Nobel Memorial Prize in Economic Sciences.


Early life and education

Theodore William Schultz was born on April 30, 1902 in a small town ten miles northwest of Badger, 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 at South Dakota State, in a three-year program that met for four months a year during the winter. After being recognized for having great potential as a student, Schultz moved on to a bachelor's program, earning his degree in 1928 in agriculture and economics. He also received an honorary doctorate of science degree from the College in 1959. He graduated in 1927, then entered the University of Wisconsin–Madison earning his doctorate in Agricultural Economics in 1930 under Benjamin H. Hibbard with a thesis, titled The Tariff in Relation to the Coarse-Feed Grains and a Development of Some of the Theoretical Aspects of Tariff Price Research. [1]

Academic career

Schultz taught at Iowa 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 the University of Chicago from 1946 to 1961. He became president of the American 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. [4]

Shortly after his move to Chicago, Schultz attracted his former student, D. Gale Johnson to the department. Their research in farm and agricultural economics was widely influential and attracted funding from the Rockefeller Foundation to the agricultural economics program at the University. Among the graduate students and faculty affiliated with the pair in the 1940s and 1950s were Clifford Hardin, Zvi Griliches, Marc Nerlove, and George S. Tolley. [5] In 1979, Schultz was awarded the Nobel Prize in Economics for his work in human capital theory and economic development.

Contribution to economic theory

Human capital theory

Schultz receiving Nobel Prize from King of Sweden Carl XVI Gustaf in 1979. Theodore Schultz receiving the Nobel Prize.jpg
Schultz receiving Nobel Prize from King of Sweden Carl XVI Gustaf in 1979.

While he was chair of economics at Chicago he led research into why post-World War II Germany and Japan recovered, at almost miraculous speeds, from the widespread devastation. Contrast this with the United 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 called Human Capital Theory, which he formulated with the help of Gary Becker and Jacob Mincer. [6] 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. [7] 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 in international development in the 1980s, motivating investments in vocational and technical education by Bretton Woods system International Financial Institutions such as the International Monetary Fund and the World 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".

Nobel Memorial Prize in Economic Sciences

Schultz was awarded the Nobel Prize jointly with Sir William Arthur Lewis for his work in development economics, focusing on the economics of agriculture. He analyzed the role of agriculture within the economy, and his work has had far reaching implications for industrialization policy, both in developing and developed nations. Schultz also promulgated the idea of educational capital, an offshoot of the concept of human capital, relating specifically to the investments made in education. [8]

Family and personal life

Schultz married Esther Florence Werth (1905–1991) in 1930. She was born and raised on a farm near Frankfort, South Dakota of German 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 from South Dakota State College in Brookings in 1927, [9] and subsequently worked as a school teacher in Waubay, South Dakota from 1927 to 1929 and then in Gregory, 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 first South Dakota State University graduate and the second South Dakotan to win a Nobel Prize after Ernest 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. [10] Schultz also was awarded the Francis A. Walker Medal in 1972, which is the highest award given out by the American Economic Association. [6]

Schultz died in Evanston, Illinois on February 26, 1998 at the age of 95. He is interred at Badger Cemetery in Badger, 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) [11]

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. [12]


Schultz, Theodore W. (1956). "Reflections on Agricultural Production, Output and Supply". Journal of Farm Economics. 38 (3): 748–762. doi:10.2307/1234459. JSTOR   1234459.

Schultz, Theodore W. (1960). "Capital Formation by Education". Journal of Political Economy. 68 (6): 571–583. doi:10.1086/258393. JSTOR   1829945. S2CID   154572248.

Schultz, Theodore W. (1961). "Investment in Human Capital". The American Economic Review. 51 (1): 1–17. JSTOR   1818907.

Books authored

Books edited

Related Research Articles

James Heckman American economist (born 1944)

James Joseph Heckman is a Nobel Prize winning American economist who is currently at the University of Chicago, where he is The Henry Schultz Distinguished Service Professor in Economics and the College; Professor at the Harris Graduate School of Public Policy Studies; Director of the Center for the Economics of Human Development (CEHD); and Co-Director of Human Capital and Economic Opportunity (HCEO) Global Working Group. He is also Professor of Law at the Law School, a senior research fellow at the American Bar Foundation, and a research associate at the National Bureau of Economic Research. In 2000, Heckman shared the Nobel Memorial Prize in Economic Sciences with Daniel McFadden, for his pioneering work in econometrics and microeconomics. As of December 2020, according to RePEc, he is the second most influential economist in the world.

Human capital is the stock of habits, knowledge, social and personality attributes embodied in the ability to perform labour so as to produce economic value.

Gary Becker American economist

Gary Stanley Becker was an American economist who received the 1992 Nobel Memorial Prize in Economic Sciences. He was a professor of economics and sociology at the University of Chicago, and was a leader of the third generation of the Chicago school of economics.

Kenneth Arrow American economist

Kenneth Joseph Arrow was an American economist, mathematician, writer, and political theorist. He was the joint winner of the Nobel Memorial Prize in Economic Sciences with John Hicks in 1972.

Franco Modigliani

Franco Modigliani was an Italian-American economist and the recipient of the 1985 Nobel Memorial Prize in Economics. He was a professor at University of Illinois at Urbana–Champaign, Carnegie Mellon University, and MIT Sloan School of Management.

South Dakota State University

South Dakota State University is a public land-grant research university in Brookings, South Dakota. Founded in 1881, it is the state's largest and most comprehensive university and the oldest continually-operating university in South Dakota. The university is governed by the South Dakota Board of Regents, which governs the state's six public universities and two special schools.

Robert Lucas Jr. American economist

Robert Emerson Lucas Jr. is an American economist at the University of Chicago, where he is currently the John Dewey Distinguished Service Professor Emeritus in Economics and the College. Widely regarded as the central figure in the development of the new classical approach to macroeconomics, he received the Nobel Prize in Economics in 1995 "for having developed and applied the hypothesis of rational expectations, and thereby having transformed macroeconomic analysis and deepened our understanding of economic policy". He has been characterized by N. Gregory Mankiw as "the most influential macroeconomist of the last quarter of the 20th century." As of 2020, he ranks as the 11th most cited economist in the world.

Myron Scholes

Myron Samuel Scholes is a Canadian-American financial economist. Scholes is the Frank E. Buck Professor of Finance, Emeritus, at the Stanford Graduate School of Business, Nobel Laureate in Economic Sciences, and co-originator of the Black–Scholes options pricing model. Scholes is currently the chairman of the Board of Economic Advisers of Stamos Capital Partners. Previously he served as the chairman of Platinum Grove Asset Management and on the Dimensional Fund Advisors board of directors, American Century Mutual Fund board of directors and the Cutwater Advisory Board. He was a principal and limited partner at Long-Term Capital Management and a managing director at Salomon Brothers. Other positions Scholes held include the Edward Eagle Brown Professor of Finance at the University of Chicago, senior research fellow at the Hoover Institution, director of the Center for Research in Security Prices, and professor of finance at MIT's Sloan School of Management. Scholes earned his PhD at the University of Chicago.

John Hicks British economist

Sir John Hicks was a British economist. He is considered one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory in microeconomics, and the IS–LM model (1937), which summarised a Keynesian view of macroeconomics. His book Value and Capital (1939) significantly extended general-equilibrium and value theory. The compensated demand function is named the Hicksian demand function in memory of him.

Robert Solow American economist

Robert Merton Solow, GCIH, is an American economist whose work on the theory of economic growth culminated in the exogenous growth model named after him. He is currently Emeritus Institute Professor of Economics at the Massachusetts Institute of Technology, where he has been a professor since 1949. He was awarded the John Bates Clark Medal in 1961, the Nobel Memorial Prize in Economic Sciences in 1987, and the Presidential Medal of Freedom in 2014. Four of his PhD students, George Akerlof, Joseph Stiglitz, Peter Diamond and William Nordhaus later received Nobel Memorial Prizes in Economic Sciences in their own right.

Wassily Leontief

Wassily Wassilyevich Leontief, was a Soviet-American economist known for his research on input–output analysis and how changes in one economic sector may affect other sectors.

Chicago school of economics

The Chicago school of economics is a neoclassical school of economic thought associated with the work of the faculty at the University of Chicago, some of whom have constructed and popularized its principles. Milton Friedman and George Stigler are considered the leading scholars of the Chicago school.

W. Arthur Lewis Saint Lucian economist and Nobel laureate

Sir William Arthur Lewis was a Saint Lucian economist and the James Madison Professor of Political Economy at Princeton University. Lewis was known for his contributions in the field of economic development. In 1979 he was awarded the Nobel Memorial Prize in Economic Sciences.

Agricultural economics is an applied field of economics concerned with the application of economic theory in optimizing the production and distribution of food and fiber. Agricultural economics began as a branch of economics that specifically dealt with land usage, it focused on maximizing the crop yield while maintaining a good soil ecosystem. Throughout the 20th century the discipline expanded and the current scope of the discipline is much broader. Agricultural economics today includes a variety of applied areas, having considerable overlap with conventional economics. Agricultural economists have made substantial contributions to research in economics, econometrics, development economics, and environmental economics. Agricultural economics influences food policy, agricultural policy, and environmental policy.

Richard Thaler American economist

Richard H. Thaler is an American economist and the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business. In 2015, Thaler was president of the American Economic Association.

Robert Fogel

Robert William Fogel was an American economic historian and scientist, and winner of the 1993 Nobel Memorial Prize in Economic Sciences. As of his death, he was the Charles R. Walgreen Distinguished Service Professor of American Institutions and director of the Center for Population Economics (CPE) at the University of Chicago's Booth School of Business. He is best known as an advocate of new economic history (cliometrics) – the use of quantitative methods in history.

Lars Peter Hansen

Lars Peter Hansen is an American economist. He is the David Rockefeller Distinguished Service Professor of economics at the University of Chicago and a 2013 recipient of the Nobel Memorial Prize in Economics.

Michael Kremer

Michael Robert Kremer is an American development economist and University Professor in economics and public policy at the University of Chicago. He is the founding director of the Development Innovation Lab at the Becker Friedman Institute for Economics. Kremer served as the Gates Professor of Developing Societies at Harvard University until 2020. In 2019, he was jointly awarded the Nobel Memorial Prize in Economics, together with Esther Duflo and Abhijit Banerjee, "for their experimental approach to alleviating global poverty."

Henry Schultz was an American economist, statistician, and one of the founders of econometrics. Paul Samuelson named Schultz as one of the several "American saints in economics" born after 1860.

Andrew Weiss (economist)

Andrew M. Weiss is Founder and Chief Executive Officer of Weiss Asset Management, a Boston-based investment firm, and Professor Emeritus Boston University.


  1. Shaars, Marvin A. (1972). "The Story of The Department of Agricultural Economics: 1909–1972" (PDF). Retrieved 2009-09-17.
  2. Theodore W. Schultz on OOjs UI icon edit-ltr-progressive.svg /// "the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1979Theodore W. Schultz, Sir Arthur Lewis". Retrieved October 3, 2012.
  3. Burnett, Paul (2011). "Academic Freedom or Political Maneuvers: Theodore W. Schultz and the Oleomargarine Controversy Revisited". Agricultural History. 85 (3): 373–397. doi:10.3098/ah.2011.85.3.373. PMID   21901904.
  4. "Theodore Schultz, 95, Winner Of a Key Prize in Economics".
  5. Sumner, Daniel A. Agricultural Economics at Chicago, in David Gale Johnson, John M. Antle. The Economics of Agriculture: Papers in honor of D. Gale Johnson. University of Chicago Press, 1996 p 14-29
  6. 1 2 "Theodore William Schultz (1902-98)".
  7. "History of Education: Selected Moments".
  8. "Theodore Schultz, 95, Winner Of a Key Prize in Economics". The New York Times. Retrieved October 3, 2012.
  9. "Archived copy". Archived from the original on 2015-02-02. Retrieved 2015-02-02.CS1 maint: archived copy as title (link)
  10. "Schultz Hall".
  11. Justin Yifu Lin. "Cambridge University Marshall Lecture – Development and Transition: Idea, Strategy, and Viability" (PDF). Archived from the original (PDF) on 2011-07-26.
  12. Theodore W. Schultz, 1981.Investing in People. p. 3. University of California Press.
Preceded by
Herbert A. Simon
Laureate of the Nobel Memorial Prize in Economics
Served alongside: Sir Arthur Lewis
Succeeded by
Lawrence Klein