As an economic concept, crowding out refers to the (unwanted) driving down of private sector spending (investment) through increased public sector spending. When a government must finance its spending with taxes and/or with deficit spending, it leaves businesses with less money and effectively "crowds them out." One of the reasons is when governments borrow large amounts of money, this can increase interest rates, which in turn discourage individuals and businesses from borrowing money, which reduces their spending and investment.

In criminology, crowding out can occur in the context of regulation: the more government tries to regulate a behaviour, the less a person's self-governance will be able to fulfill its functions.


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