The 'Overton window' refers to an observation made by Joseph Overton (1960–2003), who at the time worked for the Mackinac Center for Public Policy. He noted that only a relatively narrow range of potential political policies are considered acceptable by the public at any given time, and therefore, only a narrow range of policies are actionable. He also noted that this window of options is primarily defined by public opinion, and not by what politicians actually preferred. Of course, within this window, each politician is able to choose an individual position.
The Overton window is easily observable when you look at almost any controversial issue. Currently, the legalization of gay marriage is an easy example of something that would not have been politically feasible ten years ago, but is now feasible in many areas of the world. It is a little bit harder to identify things outside the Overton window, because they get much less coverage in the media. However, most of us have heard of radical ideas that are currently outside the Overton window: fully open borders, ending the war on drugs, spelling reform, and repealing the law of gravity.
Overton also listed a range of acceptability that might apply to any given policy:
Of course, not every policy goes through these stages - some policies never move out of the unthinkable/radical range, and others may skip levels (e.g. Japanese-American Internment Camps
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In my experience the Overton window is referred to most often by philosophers, economists, political theorists, and others who deal with abstract ideas, and who want to make it clear that that they are not crazy -- they understand that their ideas are currently outside the window. However, along with this comes the subtext that while these ideas are currently not politically acceptable, they may become so if the public is made more aware of the facts of the matter.