A vicious circle (or cycle) is a complex chain of events that reinforces itself through a

feedback loop Feedback occurs when outputs of a system are routed back as inputs as part of a chain of cause and effect that forms a circuit or loop. The system can then be said to ''feed back'' into itself. The notion of cause-and-effect has to be handle ...

, 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 fro ...

economic An economy is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services. In general, it is ...

ecological Ecology () is the natural science of the relationships among living organisms and their environment. Ecology considers organisms at the individual, population, community, ecosystem, and biosphere levels. Ecology overlaps with the closely re ...

, 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 where the outcome of a process reinforces the inciting process to build momentum. As such, these forces can exacerbate the effects ...

. 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 versus nominal value (economics), real value of the local currency, as the prices of all goods increase. This causes people to minimiz ...

. When the results are not detrimental but beneficial, the term virtuous cycle is used instead.

Examples

Subprime mortgage crisis

The contemporary

subprime mortgage crisis The American subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010, contributing to the 2008 financial crisis. It led to a severe economic recession, with millions becoming unemployed and many busines ...

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 An underwater environment is a environment of, and immersed in, liquid water in a natural or artificial feature (called a Water, body of water), such as an ocean, sea, lake, pond, reservoir, river, canal, or aquifer. Some characteristics of the ...

", 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 the proportion of people above a specified age (usually 15) not being in paid employment or self-employment but currently available for work du ...

increases, which further increase the number of foreclosures. Economist Nouriel Roubini discussed vicious circles in the housing and financial markets in interviews with

Charlie Rose Charles Peete Rose Jr. (born January 5, 1942) is an American journalist and talk show host. From 1991 to 2017, he was the host and executive producer of the talk show ''Charlie Rose (talk show), Charlie Rose'' on PBS and Bloomberg L.P., Bloombe ...

in September and October 2008.

Ecological areas

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 Sharecropping is a legal arrangement in which a landowner allows a tenant (sharecropper) to use the land in return for a share of the crops produced on that land. Sharecropping is not to be conflated with tenant farming, providing the tenant a ...

, and the intensification of

drought A drought is a period of 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, ...

. In 2021, Austrian Chancellor Alexander Schallenberg described the recurring need for lockdowns in the

COVID-19 pandemic The COVID-19 pandemic (also known as the coronavirus pandemic and COVID pandemic), caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), began with an disease outbreak, outbreak of COVID-19 in Wuhan, China, in December ...

as a vicious circle that could only be broken by a legally-required vaccination program.

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