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Schultz, Theodore W.

Published onOct 14, 2021
Schultz, Theodore W.

(April 30, 1902 – February 26, 1998)

Quick Facts

Former Nobel Prize winner in economics, Schultz battled interests between commodity groups, the federal government and the administration at the university.

Theodore W. Schultz was born in 1902, one of eight children raised on a farm near Arlington, South Dakota. He never went to high school as his family needed him to work. But he took a short course at nearby South Dakota State University, impressed his teacher, and was admitted as a regular student in 1924. By 1927, he had his Bachelor’s degree, and by 1930, he had a PhD from the University of Wisconsin and an assistant professorship at Iowa State College (now University) in the Department of Economics and Sociology. When the Department Head A.G. Black left, Iowa State found itself without the resources to conduct a true search for a replacement and named Schultz. ISC President Raymond Hughes had the following charge for his new department head: “This is a tough job. You are all that I’ve got. For heaven’s sake, make good at it.” Schultz was 32 years old and still an assistant professor.

Despite his humble beginnings, Schultz was an amazing recruiter. His vision was to combine rigorous microeconomic theory with statistical analysis to problems of economic policy. Rigorous adherence to this method made the work transparent and credible to policymakers, as opposed to the lobbying done by various special interest groups. The combination of Schultz’s persuasiveness and reputation, in addition to the lack of many job openings due to the recession, allowed the Iowa State department to attract an amazing group, one that economic historian Deidre McCloskey claimed was second only to Cambridge, England. In short order, Iowa State had on staff young faculty that would eventually garner three Nobel prizes, four members of the National Academy of Sciences and four presidents of the American Economic Association. Sadly, none of these honors were awarded when these faculty members were on staff at Iowa State.

As the reputation for quality policy analysis spread, ISC began to attract research grants from the federal government, anxious to develop strategies to resolve the severe economic problems related to the Depression and the war effort. Not all admired the adherence to rigorous research methods, particularly when the answers conflicted with the interests of the politically powerful Iowa Farm Bureau and various commodity groups. Raymond Beneke (1998) characterized these interest groups as believing that, “Iowa State College belonged to them.”

Ultimately, the conflicts came to a head in 1943 with the publication of a pamphlet written by graduate student O.H. Brownlee. At the request of the U.S. Secretary of Agriculture, Schultz had obtained a $10,000 grant from the Rockefeller Foundation to finance a series of bulletins entitled "Wartime Farm and Food Policy Pamphlets." Bulletin number 5 concluded that oleomargarine was a good substitute for butter. The National Dairymen’s Association complained. These complaints were reinforced by the Iowa Board of Education (now the Board of Regents). ISC President Charles Friley agreed to retract the pamphlet. The New Republic reported that Friley “has given up without a fight the fortress for truth and the public interest which he commanded, and he has surrendered to a self-seeking pressure group which is trying to make a profit out of ignorance.”1

In his resignation letter, Professor Schultz made clear that Pamphlet #5 was only one factor prompting his exit. The President had previously stopped the publication of a second paper by Brownlee on feed grain supplies, despite favorable peer review. The President later mandated that another paper in the Wartime Farm and Food Policy series by William Nichols and John Viegt be reviewed by the College Librarian rather than by peers. The Librarian rejected the paper. The President had instructed the business office that they not honor bills drawn against the Rockefeller grant in violation of the contract. The President had appointed a committee to reorganize the Department of Economics and Sociology without even notifying Schultz. In a separate letter to mathematics professor Edward Allen, Schultz referred to “pressure on reading lists, libraries, the topics that faculty are to avoid or to concentrate on, the refusal to allow a speaker to be heard if his views are contrary to a particular group,” as other contributing factors.

Schultz’ resignation was followed by those of fifteen other faculty members. The list included William Nichols and D. Gale Johnson, who also went to Chicago to be joined later by C. Arnold Anderson, Mary Jean Bowman, and Margaret Reid; A.G. Hart, to Columbia; Walter Wilcox to Wisconsin; Kenneth Boulding to Michigan; O.H. Brownlee and 2007 Nobel Laureate Leo Hurwicz to Minnesota; Rainer Schikele to George Washington and then North Dakota State; John Hopkins, U.S. Foreign Service; Arthur Bunce, Federal Reserve Board of Governors; Joseph Cowden, USDA; and Leray Benedict who, according to a story in the Mason City Globe-Gazette, left ‘for the east.’ Schultz served as chair of the economics department at the University of Chicago from 1946-1961, resuming his impressive ability to identify young talent. His hires included eight Nobel laureates.

In October 1979, more than 35 years after his resignation, Schultz was on the Iowa State campus as a guest lecturer. While on campus, he learned he had won the Nobel Prize in economics. Members of the press were understandably eager to talk to him about the irony of learning of his award while at the institution that had once rejected his ideals. When asked what he thought about this, Schultz said Ames to him "is a very unusual and very precious place."

Selected Sources

Theodore W. Schultz Papers, RS 13/9/14, Special Collections Department, Iowa State University Library.

Allen, Edward S. Undated. Freedom in Iowa: The Role of the Iowa Civil Liberties Union. Mimeo.

Beneke, Raymond R. 1998. “T.W. Schultz and Pamphlet No. 5: The Oleo Margarine War and Academic Freedom.” Choices 13(2): 4-8.

Burnett, Paul. 2011. “Academic Freedom or Political Maneuvers: Theodore W. Schultz and the Oleomargarine Controversy Revisited.” Agricultural History 85(3): 373-397.

Johnson, D. Gale. 1999. “Theodore William Schultz, 1902-1998.” Biographical Memoirs 77. Washington D.C.: The National Academy Press.

Mason City Globe-Gazette, January 20, 1944.

McCloskey, Deidre. 1998. “Career Courage.” Eastern Economic Journal 24(4): 525-528.

“Iowa’s “Butter-Margarine War”: T. W. Schultz’s Fight for Academic Freedom”
By David Seim. PROMARKET. May 23, 2021.

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