Theodore Schultz

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.[9] 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. Schultz said the value of labor was determined by the productivity of the labor, which was not a new economic discovery. The point of differentiation was that the labor productivity was based on one's investments into their personal "rate of return". The more skills and education on a resume, the more return one will see on these investments in the form of a larger income. This theory is still in use today, and at face value seems like a positive contribution in studying complex inner workings of differentiating pay scales. However, this has been critiqued as leading towards a lot of biases regarding the observed investments that are realistically achievable for a lower-income worker. In order for many people to make a comfortable, livable wage, it could be argued today that a college degree is the best, most guaranteed step in such a direction. Those who are first generation college students arguably have to invest far more time, money, and effort into higher education in order to receive even a somewhat similar payoff to those with nepotism connections and social qualities perceived as more high-quality. [10] 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.[11] 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".

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.[12]

• 1943. Redirecting Farm Policy, New York: Macmillan Company.
• 1945. Agriculture in an Unstable Economy, New York: McGraw-Hill.
• 1953. The Economic Organization of Agriculture, McGraw-Hill.
• 1963. The Economic Value of Education, New York: Columbia University Press.
• 1964. Transforming Traditional Agriculture, New Haven: Yale University Press.
• 1968.Economic Growth and Agriculture, New York: MacGraw-Hill.
• 1971. Investment in Human Capital: The Role of Education and of Research, New York: Free Press.
• 1972. Human Resources (Human Capital: Policy Issues and Research Opportunities), New York: National Bureau of Economic Research,
• 1981. Investing in People, University of California Press. Description and chapter-preview links.
• 1993. The Economics of Being Poor, Cambridge, Massachusetts, Blackwell Publishers
• 1993. Origins of Increasing Returns, Cambridge, Massachusetts, Blackwell Publishers

• 1945. Food for the World, Chicago: University of Chicago Press.
• 1962. Investment in Human Beings, Chicago: University of Chicago Press.
• 1972. Investment in Education: Equity-Efficiency Quandary, Chicago: University of Chicago Press.
• 1973.New Economic Approaches to Fertility, Chicago: University of Chicago Press,
• 1974. Economics of the Family: Marriage, Children, and Human Capital, Chicago: University of Chicago Press.