Literacy and economic development are inextricably linked in the literature, often with little examination. There are five rationales for this relationship: economic objectives, social objectives, political objectives, endogenous pressures, and exogenous pressures. To achieve both understanding of literacy and improved literacy programming, better methods of assessment and program evaluation should be put into place. Prior experience in assessment has been characterized by use of literacy surveys. New efforts to measure literacy include standardized test surveys of literacy and the household survey approach. The ability to analyze the effectiveness of literacy programs and accountability are also needed. Four common myths help to sustain the political and social support for literacy work, but the lack of solid evidence undergirding the claims should lead to concern as well. The myths are as follows: (1) literacy changes the way humans think, their logical abilities, and their intelligence; (2) literacy leads to human "modernization" and to the changing of attitudes about "development"; (3) literacy fosters democratic ideals and increases national productivity; and (4) illiteracy will be eradicated by 2000. The following key ideas are promoting innovation in literacy work: technology, multisectoral materials, material design, mother tongue and second language issues, and sustained leadership. (Appendixes contain 40 endnotes, a 19-item annotated bibliography, 183 references, 3 data tables, and 1 figure.) (YLB)