A vicious circle (or cycle) is a complex
chain of events that reinforces itself through a
feedback loop, with detrimental results. It is a system with no tendency toward
equilibrium (
social
Social organisms, including human(s), live collectively in interacting populations. This interaction is considered social whether they are aware of it or not, and whether the exchange is voluntary or not.
Etymology
The word "social" derives from ...
,
economic
An economy is an area of the production, distribution and trade, as well as consumption of goods and services. In general, it is defined as a social domain that emphasize the practices, discourses, and material expressions associated with t ...
,
ecological, etc.), at least in the short run. Each iteration of the cycle reinforces the previous one, in an example of
positive feedback
Positive feedback (exacerbating feedback, self-reinforcing feedback) is a process that occurs in a feedback loop which exacerbates the effects of a small disturbance. That is, the effects of a perturbation on a system include an increase in th ...
. A vicious circle will continue in the direction of its momentum until an external factor intervenes to break the cycle.
A well-known example of a vicious circle in economics is
hyperinflation
In economics, hyperinflation is a very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as t ...
.
A virtuous circle is an equivalent system with a favorable outcome.
Examples
Vicious circles in the subprime mortgage crisis
The contemporary
subprime mortgage crisis
The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis. It was triggered by a large decline in US home prices after the coll ...
is a complex group of vicious circles, both in its genesis and in its manifold outcomes, most notably the
late 2000s recession. A specific example is the circle related to housing. As housing prices decline, more homeowners go "
underwater", when the market value of a home drops below that of the mortgage on it. This provides an incentive to walk away from the home, increasing defaults and foreclosures. This, in turn, lowers housing values further from over-supply, reinforcing the cycle.
The foreclosures reduce the cash flowing into banks and the value of mortgage-backed securities (MBS) widely held by banks. Banks incur losses and require additional funds, also called “recapitalization”. If banks are not capitalized sufficiently to lend, economic activity slows and
unemployment
Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for work during the refer ...
increases, which further increase the number of foreclosures.
Economist
Nouriel Roubini described the vicious circles within and across the housing market and financial markets during interviews with
Charlie Rose
Charles Peete Rose Jr. (born January 5, 1942) is an American former television journalist and talk show host. From 1991 to 2017, he was the host and executive producer of the talk show '' Charlie Rose'' on PBS and Bloomberg LP.
Rose also co- ...
in September and October 2008.
Designing ecological virtuous circles
By involving all stakeholders in managing ecological areas, a virtuous circle can be created where improved ecology encourages the actions that maintain and improve the area.
Other
Other examples include the
poverty cycle,
sharecropping, and the intensification of
drought
A drought is defined as drier than normal conditions.Douville, H., K. Raghavan, J. Renwick, R.P. Allan, P.A. Arias, M. Barlow, R. Cerezo-Mota, A. Cherchi, T.Y. Gan, J. Gergis, D. Jiang, A. Khan, W. Pokam Mba, D. Rosenfeld, J. Tierney, an ...
. The recurring surges of the
COVID-19 pandemic
The COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing global pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The novel virus was first identified ...
is a vicious circle on a global scale.
See also
*
Catch-22 (logic)
*
Causal loop diagram
*
Chain reaction
A chain reaction is a sequence of reactions where a reactive product or by-product causes additional reactions to take place. In a chain reaction, positive feedback leads to a self-amplifying chain of events.
Chain reactions are one way that sy ...
*
Cycle of poverty
*
Cycle of violence
*
Closed timelike curve
*
Endogeneity (econometrics)
*
Positive feedback
Positive feedback (exacerbating feedback, self-reinforcing feedback) is a process that occurs in a feedback loop which exacerbates the effects of a small disturbance. That is, the effects of a perturbation on a system include an increase in th ...
*
Rational addiction
*
Reflexivity (sociology)
*
Self-fulfilling prophecy
*
Spiral of silence
*
Unintended consequences
In the social sciences, unintended consequences (sometimes unanticipated consequences or unforeseen consequences) are outcomes of a purposeful action that are not intended or foreseen. The term was popularised in the twentieth century by Ameri ...
References
General and cited references
*
Rational Choice with Passion:Virtue in a Model of Rational Addiction– In this link the author uses Aristotelian virtue as a mediator between passion and reason in the construction of utility/consumption functions in an esoteric part of consumer behaviour theory related to decision making in addictive situations.
China: A Stabilizing or Deflationary Influence in East Asia? The Problem of Conflicted Virtue– In this paper the author is using virtue in the sense of a positive outcome (balance of payments surplus) that conflicts with long term regional growth and stability.
External links
*
*
*
* {{Wiktionary inline, virtuous circle
Business cycle
Economic crises
Vicious circle