Deirdre McCloskey once thought economics and rationality were the key to understanding society, but the explanatory power of rhetoric has dented her faith in the dismal science

My life, and I suppose yours, consists of a series of big and small moments of "I have found it!" My keys. My purse. My alleged scientific discoveries. My goal in life. My Anglican God. The notable feature of my own moments, though, is that a normally alert person would have experienced them many years before I did. I seem to be stuck with an irritating naivety: gosh, you mean that when the price of petrol goes up, motorists buy less?! I've known economists and historians who had experienced all my eureka moments before they graduated from university. I stand in awe ... though, come to think of it, it must make for a boring life. Oh, yeah, once again: when profits are high in a business, a corporation or an ecological niche, entry happens, as water finds its level. Yawn. Such a life in science would be like never losing your keys.

My first scientific eureka came when I was a sophomore at university, a very wise fool. As I started to learn the macho science of economics, I suddenly saw that mere prudence, "rationality", rules. Wow: that's so much simpler than attending to human meanings. Hurrah. Therefore, the sociologists, psychologists and anthropologists are idiots.

I wrote a long paper attacking David McClelland's (then) new book The Achieving Society (1961), and carried into graduate school and beyond the economist's conviction that the only virtue a social scientist needs to consider is prudence, and that we social engineers therefore can fine-tune the economy. Bliss was it in that dawn to be alive, but to be young and a social engineer was very heaven! True, for the academic year 1966-67 at Harvard University, I taught in graduate school with another student, the anthropologist Renato Rosaldo, and had to face up for a moment to the ostensive proof that he and the books we read together (Tocqueville, Marx, Durkheim, Weber) were far from idiotic. And Vietnam showed me, as it did many of my generation, that a government can't fine-tune even a war with much in the way of rational economistic prudence.

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That last insight reinforced a drift towards libertarian convictions, which the study of economics had already started me on. Economics turned me, as it has many natural Lefties, into a Rightie. I remember realising suddenly while studying for my comprehensive examinations in graduate school that the merit of the system of capitalist prices is not that it is Leftie-fair but that it gets stuff into the hands of those who value it most, as a Rightie might wish. Holy cow! I had been educated as a Keynesian, but in suddenly grasping what many non-naive people grasped the first time they read it in an elementary economics text, I drifted towards the Rightie Chicago School of economics.

In fact, I got a job teaching at the University of Chicago, where I stayed until 1980. It was quite a place for eureka moments in those days - fully a fifth of the economists who have received Nobel prizes got them from the work they did in the 1970s in Chicago's neighbourhood of Hyde Park (where, as they say, you can't hide and you can't park). I recall grasping all of a sudden, for example, that the "monetary approach to the balance of payments" implies that Milton Friedman was entirely wrong about money because the money supply under, say, the gold standard or crawling pegs is global, not country by country. The height of my Chicago School scientific eureka moments came from eating lunch every day with the economists at the Business School, two of whom (Merton Miller and Myron Scholes) got their glittering Nobels for devising market valuation, options trading - and all our current woe. Their mathematics of portfolio balance, I saw one day, could be used to understand why medieval peasants in England scattered their holdings of land across the face of the village. I've found it!

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But then, tenured and at the age of 35, I started doubting. I realised with a jolt that economists are fibbing when they say that they follow a positivist, hypothetico-deductive method-of-science-I-learnt-in- secondary-school. The new awareness came partly from noting that when I put forward any proposition in Chicago School economic-historical science (wholly correct, I assure you), I got from other economic scientists not counter-evidence but anti-Chicago School ideology. I had already perceived that my Keynesian teachers at Harvard in earlier years had exhibited in their ways of arguing such a disgraceful lack of devotion to the plain truth. Shame on them. But around 1977, hiding in Hyde Park, I realised that the Chicago School folk had it, too - in spades, redoubled and vulnerable.

A professor of English at Chicago, Wayne Booth, asked me - on the strength, I think, of a reputation I had for being marginally more open than other economists - to give a lecture to some undergraduates on the "rhetoric of economics". Sure, I said. But what's that? Wayne suggested that I read books such as The Uses of Argument by Stephen Toulmin and The New Rhetoric by Chaim Perelman and Lucie Olbrechts-Tyteca, and I suddenly got it. Oh, my God! Even a science such as economics has a rhetoric - that is, a means of unforced persuasion! And the claimed "scientific method" ain't it!

This blindingly obvious point led me to start doubting that economics was the queen of the social sciences, or at any rate that the queen had any clothes on. First I realised (I recall the day, by then based at the University of Iowa, talking to my colleague Richard Zecher) that a crucially important technique used by economists, "statistical significance", was rhetorical rubbish. Close fit is not the same thing as scientific or political importance. It just isn't. Sic transit most of applied economics, because its practitioners even now don't get the point, against giants of statistical theory and practice such as Gosset (aka "Student"), Neyman, Pearson, Jeffreys, de Finetti, Wald, Savage, de Groot, Kruskal, Zellner. Then I also saw - again, it took years, but when I came to write about it around 1990, the penny dropped - that what economists call "proof" was also rubbish. Blackboard qualitative proofs of the "existence" of, say, an equilibrium between demand and supply - beloved of economists trained in the maths of the department of mathematics rather than the maths of the departments of physics or engineering - are meaningless because they don't tell how big is big. Years later, it struck me that the two doubts, the one about statistical significance and the one about existence theorems, were in essence the same. Real science, as opposed to cargo-cult science, does not care about the statistical or mathematical "existence" of an effect. It cares about its "oomph" in the world.

The double eurekas led me to view normal science in economics with great suspicion, a suspicion never really allayed. I've consulted with the best econometricians and the best mathematical economic theorists in the world, and none of them has the slightest notion of how to reply to the doubts. They just get sore at me (and also, it seems, at Gosset, Neyman et al). I have a lot of people sore at me.

If the usual journal article in economics is made into nonsense by ignoring magnitudes, why didn't I give up and go into investment banking? I suppose I'm an optimist, hoping with every new year that my colleagues will have eurekas about how big is big and begin doing actual scientific tests, the way physicists and others do. Certainly economists, who are very bright and hard working, do sometimes by accident discover interesting facts and have interesting ideas, despite their bizarre scientific rhetoric.

Anyway, there were new worlds of naivety yet to conquer, this time on the side of our culture that we English speakers call "arts" or "the humanities" (by contrast, in English before the mid-19th century and in all other languages on Earth, they are called by the "science" word, as in the Dutch kunstwetenschap or the French sciences humaines, impossible expressions in modern English).

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In this area, my first key discovery was a slow rediscovery of those inklings in graduate school that people outside economics are not, after all, idiots. As an economic historian, I benefited in the 1960s, 1970s and 1980s from colleagues who were historians without the skill set of economists, such as Jack Fisher at the London School of Economics, William McNeill at Chicago and Henry Horwitz at Iowa, and they were obviously not idiots. To these I later added numerous encounters with non-idiotic philosophers (Richard Rorty), non-idiotic British sociologists of science (Harry Collins) and then, astonishingly, non-idiotic literary critics (Stanley Fish).

Excited by this remarkable insight, and meeting people in such contemptibly non-scientific fields as law and communication who appeared to have brains in their heads and learning to impart, I spent a long vacation at the (then Dartmouth) Summer School of Criticism and Theory, where I took a course on poetry and magic given by Thomas Greene from Yale University. I found that one could do scientific work on meanings. Yikes!

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I therefore became open to the substantive discoveries of the humanities in the 20th century, the sort of propositions that all competent students reading English Lit have safely stored in their heads by the end of their second year ("Is there a text in this class?"), but that came to an economist as a succession of jolts. Yes, I know: if you are from the sciences you are inclined to believe that on the arts side there aren't any "substantive discoveries". With Oliver Cromwell, though, I beseech you, in the bowels of Christ, to think it possible you may be mistaken.

For one thing, I came to understand that the point of literary study is not merely to dole out stars for greatness. For another - you can see how it might be encouraged by an interest in the rhetoric of economics - I realised that literary, philosophical and narrative sciences (those sciences humaines) exhibit forms of knowledge not attainable by first-order predicate logic, or a system of axioms rich enough to contain arithmetic. For still another, I grasped that logics and axioms depend on such knowledge. And out of all this came the gobsmacking insight that language is more than the transmittal of bits of information. Language is a way of being human - the way of being human - a mobile army of metaphors (you might say).

(In the midst of all this intellectual ferment, incidentally, I had on 15 August 1995 a eureka moment in realising that I could become a woman (which I discussed in an article, "It helps to be a don if you're going to be a Deirdre", for what was then The Times ÖйúAƬ Supplement in August 1996, ). More slowly, I grew to see that the most important event in human history happened in Galilee and Jerusalem around AD30. But these are not scientific eurekas.)

Meanwhile, in the manner of a slow-motion car crash in a Hollywood film, I gradually reached the conclusion that the Harvard-Chicago economics I had learnt and taught couldn't explain the second most important event in human history, the Industrial Revolution. Investment, saving, railways, foreign trade, slavery, the rise of rationality - all inadequate. I then realised that how we talk in an economy radically affects how economics works. One day in 2007, I finally put two and two together - it had to be ideology that changed in the Industrial Revolution. Then I twigged - I remember the moment, and the satisfaction of a unified intellectual life it brought - that ideology was rhetoric.

All that wandering away from the science of economics into the realms of arts suddenly didn't look so odd. An economics adequate to explain the modern world of plate glass, general elections, indoor plumbing and ÖйúAƬ is going to have to take language seriously as a maker of meanings. That is to say - my last scientific eureka - economics should become a humanistic science of the economy. My word! Exactly.

So my series of eureka moments, for some of which I did feel like rushing through the streets of Syracuse naked, have two halves. For about 20 years they built up prudence only. For the next 20 they broke it down. Do the maths. Plus one minus one equals zero, eh?

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