This phenomenon sounds to me like what makes the setup for a financial bubble. People are so sure that one (or more) assumptions hold that they ignore all the signs that they're wrong. Maybe "The Semmelweiss Effect" is what you had in mind regarding a standard name? From Wikipedia: The Semmelweis reflex or "Semmelweis effect" is a metaphor for the reflex-like tendency to reject new evidence or new knowledge because it contradicts established norms, beliefs or paradigms.

What you know that ain't so

by NancyLebovitz 1 min read23rd Mar 201522 comments

6


This is an analysis of the Yom Kippur war (Egypt vs. Israel, 1973)-- the Israelis were interested in how Egypt managed a surprise attack, and it turned out that too many Israelis believed that the Egyptians would only attack if they had rockets which could reach deep into Israel. The Egyptians didn't have those rockets, so the Israeli government ignored evidence that the Egyptians were massing military forces on the border.

The rest of the article is analysis of the recent Israeli election, but to put it mildly, an election has much less in the way of well-defined factors than a surprise military attack, so it's much harder to say whether any explanation is correct. 

I'm sure there are many examples of plausible theories keeping people from getting to the correct explanation for a long time. Any suggestions? Also, is there a standard name for this mistake?