Teaching/Communication/Extension/Profession,

Wills, Barbara

Wills, Ian R.

English

Research Papers in Economics

Remembering T.W. Schultz,
breaker of new ground
Barbara and Ian Wills*
Nobel Laureate T.W. Schultz, 1902^98, began his 1979 Nobel lecture:
Most of the people in the world are poor, so if we knew the economics
of being poor, we would know much of the economics that really matters.
Most of the world's poor people earn their living from agriculture, so if
we knew the economics of agriculture, we would know much of the
economics of being poor.
People who are rich ¢nd it hard to understand the behavior of poor
people. Economists are no exception . . .
Schultz opted to study economics after growing up amid the severe product
price falls and foreclosures of post-WWI South Dakota. While his
subsequent research and writings in£uenced agricultural and development
# Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishers Ltd 1999,
108 Cowley Road, Oxford OX4 1JF, UK or 350 Main Street, Malden, MA 02148, USA.
The Australian Journal of Agricultural and Resource Economics, 43:1, pp. 129^132
*Barbara Wills worked for T.W. Schultz at the University of Chicago in the late 1960s;
Ian Wills is Associate Professor of Economics at Monash University.
The helpfulness of the American Agricultural Economics Association in giving permission
to reproduce the photo of T.W. Schultz which appeared in Choices in Third Quarter 1988
is gratefully acknowledged. Photograph by Patricia Evans.policies world-wide, and diverse ¢elds in mainstream economics, he never
strayed from his initial interest in the behaviour and welfare of poor people.
This interest was in no way condescending: on the contrary, as exempli¢ed
in his, at the time, iconoclastic book Transforming Traditional Agriculture, he
saw poor men and women as perfectly capable of making sound economic
judgments about such matters as adoption of new technology, family size
and the education of children, given their technological, economic and social
circumstances. Therefore, for Schultz, the job of the economist was to help
to change those circumstances, such as the lack of new technologies and
education, standing in the way of poor families' self-betterment.
From the beginning, Schultz perceived that the economic fortunes of farm
people were tied to the economic performance of, and the industry and trade
policies adopted in, the wider economy. Throughout his academic career as
a teacher and researcher, at Iowa State College and then at the University of
Chicago, he promoted the involvement of general economists in agricultural
economics and vice versa. He continually criticised politically determined
price policies which favour urban consumers and industry at the expense of
(especially poor) farm people.
Schultz pursued his research goals via advice to organisations and
committees in the United States and abroad, a voluminous correspondence
across continents and disciplines and, in particular, via the involvement and
encouragement of University of Chicago graduate students and visiting
scholars from across the world. To be seriously involved with T.W. Schultz
was to be engaged in the search for answers to the `puzzles' that he and his
collaborators identi¢ed. New or prospective Chicago graduate students, and
old acquaintances returning to Hyde Park, were expected to add to continuing
discussions on relevant topics such as the value of poor women's time or the
connections between labour markets and rural^urban income di¡erentials.
Attempts at discussion of research topics perceived to be outside the Schultz
agenda rarely succeeded. His exchanges with and encouragement of scholars
pursuing his research agenda continued into his nineties. The ultimate,
appropriately agricultural, accolade was to be `breaking new ground'.
Among general economists, Schultz is probably best known for his
development and propagation of the concept of human capital ö investments
in people and knowledge ö and its contribution to economic growth. This
interest was a natural consequence of his strong humanistic orientation ö
what his Chicago colleague Mary Jean Bowman has termed `an earthy respect
for the economic reasonableness of most men and women'.
1 More directly,
1Mary Jean Bowman, 1980, `On Theodore W. Schultz's contributions to economics',
Scandinavian Journal of Economics, vol. 82, p. 95.
130 B. Wills and I. Wills
# Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishers Ltd 1999investments in people/labour quality provided one answer to the `puzzle' of
`technical change' identi¢ed in the aggregate production function estimates
of the 1950s ö the large proportion of increases in national output not
explained by increases in conventionally measured labour and capital inputs.
Schultz's early 1960s' writings on investment in human capital and the
economic value of education, combined with a 1962 Chicago symposium on
investment in people, launched the modern study of human capital.
Recognising that the greater part of human capital investment is commonly
undertaken by the individuals and families concerned, when they sacri¢ce
alternative earnings, Schultz emphasised the micro nature of many, and in
poor societies most, decisions to invest in people. This in turn in£uenced his
collaborators and students, most prominently Gary Becker, in their
conceptual and empirical research on such topics as rates of return to
schooling and on-the-job learning, the productivity impacts of quality of
schooling and increases in life expectancy, the value of human time and the
economics of the family.
For Schultz, the payo¡ to increasing population quality took the form of
enhanced abilities to recognise and to respond to the inevitable inequalities
in rates of return to investments which arise in a dynamic economy. As
stated in his Nobel lecture: `If we were unable to observe these inequalities,
we would have to invent them because they are the mainspring of economic
growth. They are the mainspring because they are the compelling economic
signals of growth.'
What is the source of the necessary disequilibria in investment payo¡s?
Here Schultz focused on the gap between traditional methods of production
and new production techniques resulting from scienti¢c research. Beginning
with Zvi Griliches' 1950s' work on the rates of return obtained from the
adoption of hybrid maize, Schultz was involved in, or in£uenced, numerous
studies of the rates of return to agricultural research expenditures. In
Transforming Traditional Agriculture he pointed out the contrast between
high rates of return to much biological research and the limited ability of
for-pro¢t ¢rms to capture those returns. This pointed the way to the
subsequent path-breaking work of Hayami, Ruttan and Binswanger on
induced innovation in public agricultural research and its contribution to
agricultural development.
Transforming Traditional Agriculture, published in 1964, highlighted the
complementarity between the scienti¢c research and input distribution
systems which deliver new techniques and disequilibrium rates of return, and
the schooling and other investments necessary for poor people to identify
and learn to use those techniques. By emphasising the low payo¡s to
development policies which neglected either new technologies or investments
in people, Schultz provided both a telling critique of most of the agricultural
T.W. Schultz obituary 131
# Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishers Ltd 1999development policies of the 1950s, and a template for the policies adopted
by international development organisations in the succeeding decades.
To those of us from much later generations, T.W. Schultz was a courtly
gentleman, with a turn of phrase faintly reminiscent of Mark Twain (still
going strong when Schultz was born). He made special e¡orts to get to know
students from other cultures around the world; every year he and his wife
welcomed the students studying development to afternoon tea at the Schultz
home in Hyde Park. His own time was never too valuable to discuss research
with students, colleagues and visitors; such conversations often included an
injunction to consider undertaking a particular research project, in Iowa or
Indonesia or wherever, designed to put empirical £esh on some portion of
the Schultz research agenda.
Remembering, what sticks most is Schultz's inveterate optimism about
the capabilities and motivations of ordinary people ö poor men and women,
farmers and graduate students arriving at and leaving the University of
Chicago.
132 B. Wills and I. Wills
# Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishers Ltd 1999

Remembering T.W. Schultz, breaker of new ground

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