In response to: “The King’s Revolt” (Vol. 2, No. 4).


To the editors:

From the beginning, Henri Lepage’s work has had a double purpose. The first has been to translate difficult economic concepts into terms that are accessible to the widest possible audience. The second has been to set his readers upon the path of rational thinking. In this, Lepage is not simply a popularizer of economic thought; he is a worthy heir to classical epistemology. To paraphrase Diogenes, he debunks the myths of false economic proofs.

All of this is particularly evident in his review of the book by Mervyn King, former governor of the Bank of England. Adducing Hayek, Lepage denounces the mechanical illusion of knowing: “The problem is not only of complexity but also of the pretension to knowledge.” Lepage also illuminates the profound shortcomings of the theoretical models that result despite their claim to drive the real economy. In this, the great fault of King’s analysis is “not to let [the reader] even suspect that the contemporary science of economics is in a state of profound disarray.” And Lepage goes further in underlining that King’s critique does not offer a basis for a paradigmatic revolution. Often King flirts with concepts that were developed by the liberal school, the Austrian school in particular. But he does so without ever citing them, or fully comprehending their practical consequences. Finally, while denouncing the dangerous financial alchemy of the central banks, King himself falls into an error all too common among constructivists by proposing another magic formula to correct the so-called errors of the market.

For me, there is a straight line connecting King’s incapacity to reevaluate his categories of thought and the illusions of knowing. It is this link that I will try to describe, inspired by my explorations in the fields of social psychology and the neurosciences.

One of the most important concepts to master in order to understand the opinions of individuals is that of cognitive dissonance. This can be defined as follows:

The disconfirmation (contradiction) of a belief, an ideal, or a system of values causes cognitive dissonance that can be resolved by changing the belief under contradiction; yet, instead of effecting change, the resultant mental stress restores psychological consonance to the person, either by mis-perception, by rejection, or by refutation of the contradiction; by seeking moral support from people who share the contradicted beliefs; and acting to persuade other people that the contradiction is unreal.1

King’s book is perfectly aligned with this definition. Placed at the center of a system of central banks, the former governor perceived data that was incoherent with regard to his beliefs and with the beliefs of his institution. According to this principle, it was inevitable that he would attempt to restore the coherence of a system to which he had always adhered and that was a part of his psychological identity.

Since its formulation in 1956 by Leon Festinger, the concept of cognitive dissonance has been broadly validated by neuroscience.2 The human brain is constructed in such a way that over time it develops a system of beliefs founded on personality and the social status of the individual. This system of beliefs functions like biological hardware. It is almost impossible to reprogram it. Therefore, when faced with information that does not conform to a belief system, the brain begins to produce stress hormones, in particular cortisol and vasopressin.

From an economic point of view, one might see these hormones as indicators of cost. But the brain is not ready to pay the price of destroying its hardware, an integral part of the individual identity. Whence the impression, confirmed a thousand times over, that individuals do not easily change their opinions, and that they want always to be right.

Adjusting opinions—interpersonal cooperation—is only possible in the case of those opinions that do not substantially modify individual identity. Nevertheless, even in these conditions, the larger the number of individuals, the greater the transactional costs involved in making a communal decision. To ease this difficulty, human societies have usually had recourse to two methods: hierarchy and the market. In a hierarchical system, it is, ultimately, the leader who decides for all the others. And, as Olivier Sibony has remarked, “the higher one rises in the hierarchy, the greater one’s tendency to think that one is correct.”3 Whence all the professional stress that one encounters in strongly hierarchical organizations.

In contrast, the market establishes interpersonal cooperation by means of price. Voluntary exchanges take place when the brain produces dopamine, the reward hormone. For this reason, a market society is necessarily conducive to the greater happiness of all, independently of whether the exchanges are, in fact, rational. A phenomenon intuitively discovered by Jeremy Bentham at the end of the eighteenth century was that individuals do not conceive of their interests except under the auspices of pleasure and pain. They seek to maximize their pleasure, expressed as the surplus of pleasure over pain.

If one accepts the preceding arguments, a central bank is nothing other than a hierarchical system. Holder of a public, financial monopoly, a central bank is structurally incapable of achieving economic happiness for the majority, since, according to all evidence, no central bank in the world is able to know the subjective financial preferences of each person. Such knowledge would have an infinite economic cost and would rapidly consume all its resources.

On the other hand, the central banks, concentrating financial power in the hands of a few individuals, possess the means to impose their system of beliefs on the real economy—while justifying it by a posteriori mathematical reconstructions. Inevitably, the central banks are, at some point, destined for systemic failure.

For this reason, I defend—in an extension of Lepage’s Austrian approach—polymonetarism (the freedom to have several currencies in circulation in the same country), which leads to a greater alignment with reality, economic resilience, and, doubtless, prosperity. This is one of the numerous conclusions that one may draw from “The Revolt of the King,” which I have had the great pleasure of reading, and of re-reading between the lines, as it deserves.

Gilles Dryancour


Henri Lepage replies:

Bravo to Gilles Dryancour for this short but brilliant essay describing, in the simplest and most convincing way, the true meaning of the term cognitive dissonance. I finally understand precisely what it means. From this point of view, King’s book is indisputably a masterpiece of cognitive dissonance: the will of the dominant paradigm to absorb and integrate everything within itself. Thank you also to Gilles for the first lines of his letter, which I found very touching. Like him, I am increasingly convinced that the central banks are, at some point, destined for systemic failure. What will happen then? It is already possible to envision what might take their place. Vincent Bénard’s letter offers us some insights. But the real question is always the problem of the cost of the transition.


Gilles Dryancour is an economic analyst at the Turgot Institute and chairman of the Public Policy Group of CEMA, a European trade association.

Henri Lepage is a French economist.

Translated from the French by the editors.

  1. Wikipedia, “Cognitive Dissonance.” 
  2. Leon Festinger, Henry Riecken, and Stanley Schachter, When Prophecy Fails: A Social and Psychological Study of a Modern Group that Predicted the Destruction of the World, (Minneapolis, MN: University of Minnesota Press, 1956). 
  3. Quentin Périnel, “Voici pourquoi il nous est si difficile de changer d’avis,” Le Figaro, October 25, 2016.