Mancur Olson and Theodore Schultz

Two important economists with roots in the Ninth District died in recent months—Mancur Olson from North Dakota and Theodore Schultz from South Dakota. Olson was chair and principal investigator at the Center on Institutional Reform and the Informal Sector, and distinguished professor of economics at the University of Maryland at College Park at the time of his death, and Schultz was professor of economics and Charles L. Hutchinson distinguished service professor at the University of Chicago. As a tribute, The Region invited two economists familiar with their work to share their thoughts about Olson and Schultz.

Mancur Olson
1932-1998

By James M. Buchanan
Advisory General Director
Center for Study of Public Choice and 1986 Nobel Laureate
George Mason University

I met Mancur Olson in 1963 when he participated in a small conference that Gordon Tullock and I organized in Charlottesville—a conference from which the Public Choice Society eventually emerged. At that time, Mancur was among the few social scientists who were beginning to apply rigorous analysis to nonmarket activity. He later gave me some credit for having encouraged him to settle on The Logic of Collective Action for the title of his first book. Years later, Mancur Olson was the first to refer to my work and that of my colleagues as the "Virginia school," to distinguish it, properly so, from the "Chicago school" and other strands of normative discourse in political economy.

Mancur Olson was, perhaps above all else, an enthusiast for basic ideas. The realm of academic discourse was, for Mancur, always an exciting place, provided that we resisted temptations to pursue intellectualized puzzles and that we kept the ultimate practical relevance of ideas in mind.

Mancur Olson was perhaps more influential in political science than any other of his economist peers. Both of his major works, The Logic of Collective Action (1964) and The Rise and Decline of Nations (1982), exerted effects well beyond those confined to any narrowly bound discipline. His forthcoming book, Capitalism, Socialism, and Dictatorship, which must now appear posthumously, can be predicted to have comparable impact.

To those who knew him, Mancur Olson seemed always to be a very "busy" person, rushing hither and yon. But, also, he seemed always willing to engage directly in analytical discussion, with an attitude that conveyed the conviction that the ideas of others than his own also mattered.

How can the rise and decline of nations be explained? Anyone who seeks an answer will necessarily encounter Olson's thesis on the critical importance of institutional structure, as imbedded in history—a thesis that is, itself, informed by the logic of collective action. Mancur Olson had a rare ability to take highly abstract but ultimately simple ideas and to apply these ideas to the reality of economic and political development.

Economics threatens to become a dull and boring discipline in the years after the dialectic of the Cold War. Mancur Olson's death removes yet another spark. Who is there left to seek out the large ideas, and, in so doing, to generate spillover benefits to so many?

Theodore W. Schultz
1902-1998
1979 Nobel Laureate

By Vernon W. Ruttan
Regents Professor
College of Agricultural, Food, and Environmental Sciences
University of Minnesota

Theodore W. Schultz dominated the field of agricultural economics for half a century beginning in the mid-1930s. He became a major source of the most creative ideas in the field of economics for several decades beginning in the mid-1950s. He received the Nobel Prize in economics in 1979.

The path that led from a South Dakota farm to a Nobel Award in 1979 was not easy. Schultz has written:

I learned during my youth how hard it was for farm families to stay solvent. Farm product prices fell abruptly by more than half. Banks went bankrupt and many farmers suffered foreclosures.

My schooling was disrupted by the shortage of labor during World War I. It meant foregoing high school. I managed to enter college in 1924 and was permitted to complete my college work in three years.

While head of the Department of Economics and Sociology at Iowa State University, he brought together a group of brilliant young scholars who placed the department at Iowa State at the forefront of their discipline. He insisted that agricultural economics must be grounded in economic theory. His seminal paper on "The Theory of the Firm and Farm Management Research" (1939) forced the field of farm management into the modern era. Two books published in the 1940s, Redirecting Farm Policy (1943) and Agriculture in an Unstable Economy (1945) demonstrated the fallacy of the conventional wisdom that depressions were "farm lead and farm fed." He demonstrated conclusively that instability in the agricultural economy was generated primarily by the failure of macroeconomic policy.

During World War II he organized and edited a series of reports on wartime food strategy. One of these reports, prepared by a younger colleague (Ozwald Brownlee, who later became a member of the University of Minnesota Economics Department), argued that in its nutritional value margarine "compared favorably with butter." The report became the focus of considerable political controversy in Iowa. The "margarine incident" precipitated Schultz's move to the University of Chicago and to the departure from Iowa of many of the young faculty that he had assembled at Iowa State.

Schultz's most influential contribution in the field of economic development was a small book, Transforming Traditional Agriculture (1964). His insistence that even poor farmers in poor countries are decision-makers who make the best with the resources at hand became known as the "poor but efficient" hypothesis. He also insisted that the "high pay off" sources of growth in agriculture were:

• the capacity of the agricultural research system to provide new technical knowledge,

• the capacity of the industrial system to develop, produce and market the technical inputs employed in agriculture,

• the investment in education that enhanced the capacity of farmers to use modern inputs effectively and to adjust to market forces.

• In his later work Schultz placed primary emphasis on productivity effects of education, particularly the education of women, as a source of economic growth.