The Overton Window – How does a radical opinion go mainstream?

16th November 2011

Twenty-five years ago, student fees were so off the agenda that undergraduates would not have known how to argue the point. Only the fringe of the fringe would have dared put the idea forward.  Today, it's accepted along with huge student debt.

Even 15 years ago, the concept of invading middle east countries that were not directly attacking the UK would have been met with derision – didn't the UK learn its lesson at Suez? The history of the past decade shows how that idea has changed.

Even ten years ago, arguing in favour of Britain joining the euro and signing up for a federal Europe would have been part of normal debate. Now it will mark you out as an economic oddball at best – a dangerous freak in many people's book.

These, and many other examples, show that ideas once seen as beyond challenge – the equivalent of the sun rising in the west – can rapidly become unacceptable, replaced by a new orthodoxy that equally appears to be set in stone.

For investors, and especially long term investors, the idea is vital to understanding markets. Concepts change over time so what was considered normal to one generation is seen as an aberration to the next.  Students of Elliot Wave theory often justify their long wave (around 30 years) principle on the grounds that it is one generation to learn and the next to forget. Or what goes around, comes around.

Over the last decade, the automatic acceptance of the cult of the equity has taken a hard knock from bond fans. Once the superiority of the equity was written in stone – now, at best, it is written on flimsy paper.

This change in the reactions of the public and opinion formers to ideas current in politics, economics or other disciplines is known as the Overton Window.  This is named after Joseph P Overton, of the Mackinac Center for Public Policy for Public Policy, a Michigan-based free market think tank.  Overton died, aged 43, in an air crash in 2003, less than three months after marrying.

But he lived long enough to give his name to the concept that the focus along the continuum between total perceived normalcy and complete kookiness can and does move. Go back far enough in time and the concept of anyone enjoying medical services without a direct payment or going to university without both Latin and Greek or even questioning British foreign policy would have marked the person putting forward that point of view as a definite oddball, someone beyond respectability.

Overton codified how ideas were placed along a line that started with unthinkable, moving through radical, acceptable, sensible, popular and finally entry into the status quo as policy that would appear to have been there for ever. Argue for free university tuition and grants for all (normal until around 25 years ago) and you won't find anyone to debate with you – the subject is off the agenda.

So what was unthinkable has become policy and what was policy has become unthinkable.  The trick for investors is to see it coming.

Pitching an idea from the beyond the pale area along the spectrum towards policy can be an overt move.  One frequently used method is to repeat the concept over and over so it becomes embedded – it has achieved every day status, the normalcy of the quotidian.  Opponents eventually lose the will to argue (or to live).

A second route is to posit ideas that are more extreme than those you really want. US "shock jocks" probably don't believe in bombing Cuba or Venezuela but constantly bombarding the public softens them up for a less extreme course.

In economics, the locus of the argument over taxation has been moved towards low taxes and flat taxes (often the same). The tax rates imposed on the rich 30 years ago are now well into unthinkability.

Once that happens and it becomes acceptable or policy, then the Overton window has moved and the process can start again with a new extreme focus. The reversal of the UK tax machine to increase taxes two years ago is a rare example – sold as a temporary measure, just as income tax was positioned 200 or so years ago.

The Overton theory has been around for centuries – it is not an Overton invention. 

And it is not universally accepted. It may depend on concentration of media power in the hands of a small group with an agenda rather than spreading it around a wide spectrum of thinking. So there is a one-way pull on ideas.

Others, including the Rockridge Institute, believe the Overton Window is a distortion. Perhaps, the most serious criticism is Overton's reliance on the mainstream (as opposed to individuals). It is easy to assume that altering the mainsteam one step in whatever direction is more important than the activities of a small group.  Investors should note this as well.

More from Mindful Money:

Market crash: The illusion of knowledge

Alternative investment tools – break away from the herd

Market crash: The secret to investment timing

Investment perspectives: The language of the crisis

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18 thoughts on “The Overton Window – How does a radical opinion go mainstream?”

  1. Robert S says:


    Where does one begin?  I read last night (okay, newspapers aren’t the most reliable!), that the Irish central bank has reportedly said that the country’s lenders need a further 3-4 billion Euros!  Ouch!  When will the Irish stop hemorrhaging cash?  Then this morning I read that the EU are drafting a law which will oblige EU countries to bail out one another’s struggling banks.  How’s that going to go down in Germany?  And finally, there’s an article from Ambrose Evans-Pritchard in The Telegraph, which talks about Europe pawning their gold, which sounds quite unusual.  If anyone’s read the article, I’d be grateful if they could explain how it works.  

    All in all, it looks like, slowly, the future is catching up with the proverbially kicked can.


    1. Rods says:


      I read that article and my take on what it means is that Germany would setup a time limited (their constitution does not allow it to be open ended) bailout fund, where all of the Eurozone countries would pawn all of their debts above 60% of GDP. The interest rates would be much lower than those currently for distressed Eurozone countries.

      Those bonds would be backed by a countries assets including gold reserves as collateral. These would be held by Germany, so the gold would be shipped there. There is already decent on this with Italy saying they don’t want their gold out of their control.

      Germany said they would consider it but not before next year (presumably to get the Presidential elections out of the way first) .

      I can see four major flaws:

      1. How does this help countries with budget deficits, if they still exist with these lower interest rates? As the debt to GDP ratio would continue climbing.

      2. If countries continue to be in recession then the debt to GDP will automatically rise above 60% again.

      3. What happens if a country cannot pay of the debts within the life of the fund and raise money at reasonable rates in the market place?

      4. What happens if a country defaults and the pledged assets are worth far less than the value of the bonds. Who picks up the losses? The German taxpayer?

      I looked at this as just kicking the can further down the road, hoping something, like growth, would turn up during the life of the fund, to save the Eurozone’s skin. With the current divergence in the Eurozone economies the imbalances between the north and south are getting worse and this does nothing to address this. All they are doing is possibly staving off the day when it all goes bang. The more financial engineering / bank bailing that happens before it all falls apart the bigger the bang and sadly the more all of Europe will be impoverished.

      Anyway if the pooling of asset backed debt like this is such a good idea, why didn’t the banks think of it? O err, they did and called them CDOs, which triggered this mess and depression in 2008 in the first place!!!! 

      1. Anonymous says:

        Hi Rods,

        The devil is in the detail. If Germany is offering loans to insolvent countries, the small print would restrict credit to posted collateral and be punative in the event of a default.

        In short : here are your eurobonds, offered on terms you should not accept. Borrower beware.

        Best of all for Germany, it makes other countries responsible for rejecting the eurobond plan.

      2. Anonymous says:

        Hi Rods

        It is always 60% of GDP isnt it? And the significance of it as a level is something which escapes me yet they always seem to return to it.
        And of course when they have it as a target most nations ignore it which is hardly an inspring historical example.

         Speaking of historical examples Germany taking away gold from other European countries……..!

    2. Anonymous says:

      Hi Robert

      As Rods has replied about the gold issue let me discuss this bit. “Then this morning I read that the EU are drafting a law which will oblige EU countries to bail out one another’s struggling banks”

      I think that Eurocrats would love it but the paymasters such as Germany Finland etc will say no. I think that Finland has alreadt rejected it which was a particular irony as Ollie Rehn had proposed it..

  2. The_forbin_project says:

    Ireland to vote no ?   how many times one asks  one’s self !

    I’d advise them to  vote no , then default  or atleast let the banks default , afterall they are making money  as a country   – just the zombie banks dragging them down  – so let them go!  they are capitalist institutions after all – there will be other banks rising from the ashes .

    but as the banks run the country I guess not  , eh?


    1. Anonymous says:

      Hi Forbin

      The Eurocrats would reply as many times as necessary to get (what they perceive as) the right result..

      The “ship of fools” looks like it is still in charge of Ireland’s destiny.

  3. JW says:

    Hi Shaun
    They will just be asked to keep re-voting until they get it ‘right’.
    Ireland is like BA, a pension fund that just happens to have an airline attached to it. In this case its a bust Bank that just happens to have a country attached to it.
    I note today that the EU commission has tried to suggest a SMP bail out for banks. Shot down in seconds by Germany. Spain trying to get common bail out for its banks, Italy next, all supported by Hollande. Germany looking more and more on its own.
    Nearing the time for a ‘Swift’ exit? 

    1. Anonymous says:

      Hi JW

      Everyone seems full of historical parallels today with Germany potentially carting away gold and now shooting things down. As things get more desperate I expect the proposed plans to follow the silly,sillier,silliest route that I have described in the past.

      So Germany’s flak guns will need plenty of ammunition.

      1. Alex Eames says:

        Talking of which. Did you catch that G7 photo of Cameron celebrating with Obama and Merkel looking on when England beat the Germans on penalties?

        I reckon this is set to become an iconic photo.

        England beat the Germans with the Americans lending a hand and the French looking on with detatched interest. How historically symbolic.

  4. Noo 2 Economics says:

    It’s time for acceptance that the unified currency and federal economic directives experiment has failed. It’s had 10 or 13 years (if you want to be pedantic about the date of it’s birth) to succeed. For a while it seemed to work, but the events of the last 5 years have proved that to be a mirage.

    If the countries won’t accept one Central bank (ECB) and one set of fiscal policy decided centrally (like USA) then it is time to dismantle and de – federalise and return to the old free trade zone known as the Common market as I said yesterday.

    If they don’t, I believe economics will eventually force them to and it will be a whole lot messier and painful then it would be if it is done now. I don’t believe that “controlled defaults or dismantling of the Eurozone” is achievable. It will be very painful, but not half as painful if they continue with their heads in the sand waiting for “something to turn up” Because it will, but it won’t be what they were hoping for or expecting.

    Frankly, in that scenario I see Germany becoming the new Greece but, hey ho, thats the price you pay for obstinacy and refusing to pay the FULL PRICE for the good times you’ve had at the expense of your Southern cousins.      

    1. Alex Eames says:

      One Bank to rule them all,
      One Bank to fund them,
      One Bank to own them all
      and in the crisis fine them.

      My preciousssssssssssssssssssss

      1. Anonymous says:

        Very good,very good….

        But in that case who are Frodo,Aragorn and Gandolf?

        1. Alex Eames says:

          Well Bernanke’s a bit of a wizard isn’t he? And he’s got a beard. Doubt he’s going to rescue us with his magic printing press though.

  5. Zak. says:

    Just for the record…

    “Ireland should default and return to the punt”

    1. Anonymous says:


      Except in this instance the default is the more important bit as Ireland does not have the trade deficits of the others indeed quite the reverse.

  6. Anonymous says:

    Hi Shaun – the European Economic Recovery Programme of 2008 and 09 demonstrated a weakness in this growth pact. Those countries who needed discretionary fiscal stimulii the most ( periphery) could not boost demand but those carrying surpluses could ( stronger north). The stability and growth pact therefore acted to constrain those most in need and help those least in need. So much for a Union of equals.

  7. Bill says:

    It would seem that the EU has one answer to any crisis they generate.  That being ‘Give us more Power!’.  We seem to be drifting to a Europe where democracy is loudly proclaimed but very rarely in place.

    The debate is being run in Ireland on the basis of ‘If you vote YES then we can borrow at 3% vote NO and the sky is the limit’.

    Is there any way of recovering lost power from the EU – I think not…

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