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A vicious circle (or cycle) is a complex
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.
A vicious circle (or cycle) is a complex chain of events
A chain of events is a number of actions and their effects that are contiguous and linked together that results in a particular outcome. In the physical sciences, chain reactions are a primary example.
Determinism
''Determinism'' is the philo ...
that reinforces itself through a feedback loop, with detrimental results. It is a system with no tendency toward equilibrium ( social, economic, ecological, etc.), at least in the short run. Each iteration of the cycle reinforces the previous one, in an example of positive feedback. 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.
A virtuous circle is an equivalent system with a favorable outcome.
Examples
Vicious circles in the subprime mortgage crisis
The contemporary subprime mortgage crisis is a complex group of vicious circles, both in its genesis and in its manifold outcomes, most notably thelate 2000s recession
The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At t ...
. 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 increases, which further increase the number of foreclosures.
Economist Nouriel Roubini
Nouriel Roubini (born March 9 1958) is a Turkish-born Iranian-American economist. He is Professor Emeritus (2021–present) and was Professor of Economics (1995–2021) at the Stern School of Business, New York University, and also chairman of Ro ...
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-an ...
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 thepoverty cycle
In economics, a cycle of poverty or poverty trap is caused by self-reinforcing mechanisms that cause poverty, once it exists, to persist unless there is outside intervention. It can persist across generations, and when applied to developing count ...
, sharecropping, and the intensification of drought. The recurring surges of the COVID-19 pandemic is a vicious circle on a global scale.
See also
*Catch-22 (logic)
A catch-22 is a paradoxical situation from which an individual cannot escape because of contradictory rules or limitations. The term was coined by Joseph Heller, who used it in his 1961 novel ''Catch-22''. An example is Brantley Foster in '' The ...
* Causal loop diagram
A causal loop diagram (CLD) is a causal diagram that aids in visualizing how different variables in a system are causally interrelated. The diagram consists of a set of words and arrows. Causal loop diagrams are accompanied by a narrative which d ...
* 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 sys ...
* Cycle of poverty
In economics, a cycle of poverty or poverty trap is caused by self-reinforcing mechanisms that cause poverty, once it exists, to persist unless there is outside intervention. It can persist across generations, and when applied to developing cou ...
* Cycle of violence
The term cycle of violence refers to repeated and dangerous acts of violence as a cyclical pattern,Closed timelike curve
In mathematical physics, a closed timelike curve (CTC) is a world line in a Lorentzian manifold, of a material particle in spacetime, that is "closed", returning to its starting point. This possibility was first discovered by Willem Jacob van ...
* Endogeneity (econometrics)
* Positive feedback
* Rational addiction In behavioral economics, rational addiction is the hypothesis that addictions can be usefully modeled as specific kinds of rational, forward-looking, optimal consumption plans. The canonical theory comes from work done by Kevin M. Murphy and Gary ...
* Reflexivity (sociology)
In epistemology, and more specifically, the sociology of knowledge, reflexivity refers to circular relationships between cause and effect, especially as embedded in human belief structures. A reflexive relationship is bidirectional with both the ...
* Self-fulfilling prophecy
A self-fulfilling prophecy is a prediction that comes true at least in part as a result of a person's or group of persons' belief or expectation that said prediction would come true. This suggests that people's beliefs influence their actions. T ...
* Spiral of silence
The spiral of silence theory is a political science and mass communication theory proposed by the German political scientist Elisabeth Noelle-Neumann. It states that an individual's perception of the distribution of public opinion influences tha ...
* Unintended consequences
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