Crowding out (economics)

In economics, crowding out happens when the government starts buying or selling more stuff in the market. This affects other people and businesses--usually in a bad way.

For example, if the government buys more stuff, it may have to borrow more. By borrowing more there will be a higher interest rate (see supply and demand). This will make it harder for other companies and people to borrow. The government is said to "crowd out" the market.[1]


  1. Olivier Jean Blanchard (2008). "crowding out," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
      • Roger W. Spencer & William P. Yohe, 1970. "The 'Crowding Out' of Private Expenditures by Fiscal Policy Actions," Federal Reserve Bank of St. Louis Review, October, pp. 12-24