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RomeoStevens comments on Dead Child Currency - Less Wrong Discussion
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the depressing reality is that the child in the emperor's new clothes would have been lynched.
The specific story described is perfectly plausible, because it involves political pressure rather than social, and (due to the technology level and the like) the emperor's guards can't kill everybody in the crowd, so once everyone starts laughing they're safe. However, as a metaphor for social pressure it certainly is overly optimistic by a long shot.