Schultz set out to investigate an important area of economics; an investigation that would help humanity as a whole. He directed his attention to examining agricultural economics and poverty, which culminated in his world-famous work "What is the economics of being poor?".
"I was trying to understand the composition of what made people poor," Schultz said. "My first efforts went into identifying the poor. I’m not talking about the individual that is poor. I’m thinking of a whole community, or as it’s the case in some places, I’m thinking of the whole country."
How can you identify poor communities?
Schultz developed three effective methods to identify poor communities. The first examines the amount of income people in the community spent on food. "If the fraction of income spent on food is half or more, then that’s a pretty strong sign that they’re really poor," Schultz explained. "By this test, you will be able to identify most of the poor communities. You don’t have to go any further, but I went further." He smiled, and then explained that the second indicator is average life expectancy in a given area. But, as he highlighted, the most important factor is the third: the level of skills, the abilities that people have acquired and their state of knowledge. "So many people don’t even have the beginnings of writing and skills, language command," Schultz said. "75 percent of the annual income of people in the United States is derived from work. From a highly skilled population. And that’s what you have in Europe and Canada too."
How can we enhance poor people’s welfare?
Before Schultz, intellectuals held the common view that, for an economy to progress, attention should be focused on advancements in industry and not agriculture. They held the view that agriculture was a symbol of the past, not the future. Schultz countered: "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."
As an example, he mentioned people in Africa. "People on the unproductive soils of the Sahara, on the somewhat more productive soils on the slopes of the Rift landform, and on the highly productive lands along and at the mouth of the Nile, all have one thing in common: they are very poor." He strongly underscored that understanding the history of the people, the educational standards, and the level of ability and skills has been far more important than the most detailed and exact knowledge about the composition of the Earth’s surface. "While land per se is not a critical factor in being poor, the human agent is: investment in improving population quality can significantly enhance the economic prospects and the welfare of poor people."