
He devised the test and scale in 1912 while working at the fledgling research division of the Parke-Davis pharmaceutical company in Detroit, Michigan.
As originally devised, Scoville created a solution of the pepper extract diluted in sugar water until the 'heat' was no longer detectable to a panel of (usually five) tasters; the degree of dilution determined its measure on the Scoville Scale.
A sweet pepper, such as a bell pepper that contains no capsaicin at all, has a SHU rating of zero (no heat detectable even undiluted); whereas the hottest chillies, such as habaneros, have an SHU rating of 300,000 or more, indicating that their extract has to be diluted 300,000-fold before the capsaicin present is undetectable.
The greatest weakness of the Scoville Organoleptic Test is that it relies on human perceptions making it a highly subjective grading system. Over the years there has been much controversy as to the accuracy of the Scale, however it continues to be used by cooks and restaurateurs everywhere.

Webster's Online Dictionary
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Scientists have also developed a more scientific screening using HPLC (chromatography). That would be more expensive, however, than sugar water and a human taster!
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