The Milton Friedman Model of Policy Change

post by JohnofCharleston · 2025-03-04T00:38:56.778Z · LW · GW · 2 comments

Contents

  A Model of Policy Change
  Crises Can Be Schelling Points
  Avoid Being Seen As “Not Serious”
  What Crises Can We Predict?
None
2 comments

One-line summary: Most policy change outside a prior Overton Window comes about by policy advocates skillfully exploiting a crisis.

 

In the last year or so, I’ve had dozens of conversations about the DC policy community. People unfamiliar with this community often share a flawed assumption, that reaching policymakers and having a fair opportunity to convince them of your ideas is difficult. As “we”^[1] have taken more of an interest in public policy, and politics has taken more of an interest in us, I think it’s important to get the building blocks right.

Policymakers are much easier to reach than most people think. You can just schedule meetings with congressional staff, without deep credentials.^[2] Meeting with the members themselves is not much harder. Executive Branch agencies have a bit more of a moat, but still openly solicit public feedback.^[3] These discussions will often go well. By now policymakers at every level have been introduced to our arguments, many seem to agree in principle… and nothing seems to happen.

Those from outside DC worry they haven’t met the right people, they haven’t gotten the right kind of “yes”, or that there’s some lobbyists working at cross purposes from the shadows. That isn’t it at all. Policymakers are mostly waiting for an opening, a crisis, when the issue will naturally come up. They often believe that pushing before then is pointless, and reasonably fear that trying anyway can be counterproductive.

A Model of Policy Change

“There is enormous inertia — a tyranny of the status quo — in private and especially governmental arrangements. Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.”^[4] 

—Milton Friedman

That quote is the clearest framing of the problem I’ve found; every sentence is doing work. This is what people who want to make policy change are up against, especially when that policy change is outside the current Overton Window. Epistemically, I believe his framing at about 90% strength. I quibble with Friedman’s assertion that only crises can produce real change. But I agree this model explains most major policy change, and I still struggle to find good counter-examples.

Crises Can Be Schelling Points

This theory, which also underlies Rahm Emmanuel’s pithier “Never let a good crisis go to waste,” is widely believed in DC. It’s how policies previously outside the Overton Window were passed hastily:

• In the wake of the September 11th Attacks, sweeping changes to the National Security infrastructure were implemented by the PATRIOT Act in the following month, long before any investigations were complete.

• During the 2008 Financial Crisis, Lehman Brothers was allowed to collapse without a plan for its liabilities in September of 2008. The crisis intensified so quickly that the Troubled Asset Relief Program (TARP), an order of magnitude larger than what would have been necessary for Lehman Brothers, passed Congress three weeks later. Then-Chairman of the New York Federal Reserve, Timothy Geithner, famously observed of the time, “Plan beats no plan.”^[5]

• COVID-19 is recent enough to not need a detailed summary, but the scale of the income support programs implemented is still hard to fathom. The United States nearly had a Universal Basic Income for several months, for both individuals and small/medium businesses. 

It’s also why policies don’t always have to be closely related to the crisis that spawned them, like FDA reforms after thalidomide.^[6] 

Policy change is a coordination problem at its core. In a system with many veto points, like US federal government policy, there is a strong presumption for doing nothing. Doing nothing should be our strong presumption most of the time; the country has done well with its existing policy in most areas. Even in areas where existing policies are far from optimal, random changes to those policies are usually more harmful than helpful.

Avoid Being Seen As “Not Serious”

Policymakers themselves have serious bottlenecks. There is less division between policy-makers and policy-executors than people think. Congress is primarily policy-setting, but it also participates in foreign policy, conducts investigations, and makes substantive budgetary determinations. At the other end of Pennsylvania Avenue, the Executive Branch ended up with much more rule-making authority than James Madison intended. Those long-term responsibilities have to be balanced against the crisis of the day. No one wants to start a policy-making project when it won’t “get traction.”

Many people misunderstand the problem with pushing for policy that’s outside the Overton Window. It would be difficult to find a policymaker in DC who isn’t happy to share a heresy or two with you, a person they’ve just met. The taboo policy preference isn’t the problem; it’s the implication that you don’t understand their constraints.

Unless you know what you’re doing and explain your theory of change, asking a policymaker for help in moving an Overton Window is a bigger ask than you may realize. You’re inadvertently asking them to do things the hard, tedious way that almost never works. By making the ask at all, you’re signaling that either you don’t understand how most big policy change happens, or that you misunderstand how radical your suggested policy is. Because policymakers are so easy to reach, they have conversations like that relatively often. Once they slot you into their “not serious” bucket, they’ll remain agreeable, but won’t be open to further policy suggestions from you.

What Crises Can We Predict?

The takeaway from this model is that people who want radical policy change need to be flexible and adaptable. They need to:

• wait for opportunities,
• understand how new crises are likely to be perceived,
• let the not-quite-good-enough pitches go, to avoid being seen as a crank,
• ruthlessly exploit the good-enough crisis to say, “Called it,”
• and then point to a binder of policy proposals.

At the “called it” step, when you argue that you predicted this and that your policy would have prevented/addressed/mitigated the crisis, it helps if it’s true.

What crises, real or perceived, might surprise policymakers in the next few years? Can we predict the smoke?^[7] Can we write good, implementable policy proposals to address those crises?

If so, we should call our shots; publish our predictions and proposals somewhere we can refer back to them later. They may come in handy when we least expect.^[8] 

1. ^{^}

   Left deliberately undefined, so I don’t get yelled at. Again.

2. ^{^}

   https://www.lesswrong.com/posts/2sLwt2cSAag74nsdN/speaking-to-congressional-staffers-about-ai-risk [LW · GW]

3. ^{^}

    Up to and including the White House requesting comment on behalf of the Office of Science and Technology Policy: https://www.whitehouse.gov/briefings-statements/2025/02/public-comment-invited-on-artificial-intelligence-action-plan/

4. ^{^}

    “Capitalism and Freedom”, 1982 edition from University of Chicago Press, pages xiii-xiv.

5. ^{^}

    “Stress Test: Reflections on Financial Crises”, 2014 edition from Crown, New York.

6. ^{^}

   See Ross Rheingans-Yoo’s blog post https://blog.rossry.net/p/39d57d20-32d9-4590-a586-2fa47bb91a02/ and interview with Patrick McKenzie https://www.complexsystemspodcast.com/episodes/drug-development-ross-rheingans-yoo/

7. ^{^}

   https://www.lesswrong.com/posts/5okDRahtDewnWfFmz/seeing-the-smoke [LW · GW]

8. ^{^}

   https://www.youtube.com/watch?v=vt0Y39eMvpI

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