Did the relatively high level of literacy in Sweden prior to 1850 play any role in agrarian change and economic growth? According to influential scholars, such as Carlo Cipolla and Lars Sandberg, this was not the case. In this article, however, the authors put forward literacy as a transaction technology. Freeholders in the agrarian economy that expanded during the early nineteenth century used it as such and empirical evidence is presented for its significance during the enclosure movement and in the expansion of the rural credit market. The authors also discuss the use of literacy as a proxy-variable for ‘human capital’ or ‘knowledge’ in growth accounting and stress the existence of different literacy cultures. They maintain that the functional literacy of the Swedish freeholders – reading and writing – can be used as a proxy-variable for human capital. That is not necessarily the case with the mere reading ability more typical for women, tenants on manorial land, and the lower agrarian classes. The Swedish example indicates that the literacy variables used in international comparisons actually mirror very different kinds of literacy.