Can someone explain to me the virtuous cycle and how it works; furthermore, if there is one, a flaw in the cycle
In: Economics
Is someone doing their homework on Reddit?
A virtuous cycle is when an action drives an every growing outcome where the outcome is considered positive. For example, I run a company and invest in my customer service team to improve working conditions and this morale. The team then provides better service that makes happier customers and those interactions improve morale again. At this point the morale keeps increasing and thus the service keeps increasing which keeps improving customer responses and therefore morale…
An issue would be that these types of things don’t really go on forever and there’s always external factors that can get in the way. One team member gotta through a divorce and it doesn’t matter how good things are at the office, their likely not in as good a mood and that can role outward.
Another limitation is that most things tend to move toward an asymptote. Another way, the marginal utility of most things decreases as you have more of it. I give you $5 and you’re happy. I give you $100, you’re happier. I give your $10M and I give you $1B and you’re likely equally happy when though $1B is 100x more money. In the marginal utility sense we’ll look at water. Your first 10 gallons of water a day may be very important so you can shower, cook, brush your teeth… Maybe you’re willing to pay $10 power gallon for the first ten. Now, the eleventh gallon, sure you could take a slightly longer shower but it’s not as important, you’ll only pay $8 for that. The 20th is basically worthless and maybe your have nowhere to store it and so you’ll have to be paid to take it.
My point being. Most things don’t and can’t just improve forever. There are limits and so a virtuous cycle will always fail at some point.
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