Having a literate person in the household is the low-tech counterpart of having a computer. Everybody benefits – especially, it seems, if the literate member is female – since he or she can do simple but crucial things like interpreting the pamphlet left by the agricultural extension worker or a doctor''s prescription. But according to Professors Kaushik Basu and James Foster, writing in the November Issue Economic Journal, the standard ''literacy rate'' measure and educational policies derived from it ignore the distribution of literate people across households. These researchers propose a new measure of ''effective literacy'' which should radically alter the design of drives to improve literacy.
Basu and Foster argue that:
The standard measure of literacy – the so-called ''literacy rate'' – tells us nothing about how the literate members of society are distributed across households. In India in 1981, for example, the literacy rate was 43%. But this figure conceals the fact that 25% of households had no literate members. So not only were 57% of Indians illiterate, but approximately 25% did not even have easy access to a literate person.
A literate member of a household provides benefits for everyone, though the benefits may be different depending on whether the literate person is male or female. All piecemeal evidence suggests that the benefits will be greater with a literate female.
We should take account of this ''positive externality'' of literate household members in measuring ''effective literacy'' in a country. According to Basu and Foster''s proposed new measure, if India''s 43% literacy were spread across households so that each household had at least one literate member, effective literacy in India would be greater than the standard literacy rate suggests.
The implications of the new measure for different Indian states are striking. Rankings change remarkably, with West Bengal, for example, moving down the literacy ranking of states and Himachal Pradesh moving up. This suggests that even in international comparisons, the literacy status of nations will look very different once we take account of the externality of a literate household member.
The researchers conclude that if international organizations and national governments switch over to measuring literacy by their new method, it is likely to influence educational policy in developing countries. For example, governments with limited budgets often concentrate on small areas, trying to achieve 100% literacy in one district or cluster of villages since such an achievement is always considered newsworthy. Such concentrated effort will have a limited effect on the Basu-Foster measure, which will improve more rapidly if the educational effort is spread out more thinly across the economy, with perhaps a special emphasis on female literacy.
''On Measuring Literacy'' by Kaushik Basu and James Foster is published in the November 1998 issue of the Economic Journal.