Economic stability

Capital and the Debt Trap reports that "[C]ooperatives tend to have a longer life than other types of enterprise, and thus a higher level of entrepreneurial sustainability. In [one study], the rate of survival of cooperatives after three years was 75 percent, whereas it was only 48 percent for all enterprises ... [and] after ten years, 44 percent of cooperatives were still in operation, whereas the ratio was only 20 percent for all enterprises" (p. 109). "Cooperative banks build up counter-cyclical buffers that function well in case of a crisis," and are less likely to lead members and clients towards a debt trap (p. 216). This is explained by their more democratic governance that reduces perverse incentives and subsequent contributions to economic bubbles. Capital and the Debt Trap is a research monograph by Claudia Sanchez Bajo[1] and Bruno Roelants. The first four chapters provide a general summary of the current international economic instability, noting that cooperatives have on average performed better than traditional for-profit corporations. The next four chapters describe four different cooperatives in four different countries. The final chapter provides a summary. Cooperatives seem on average to last longer and be more responsive to the needs of customers and the communities in which they operate, because their shared ownership and participative management generally makes labor more flexible while reducing the incentives of upper managem

nt to maximize short term performance at the expense of the long term. An economic bubble (sometimes referred to as a speculative bubble, a market bubble, a price bubble, a financial bubble, a speculative mania or a balloon) is "trade in high volumes at prices that are considerably at variance with intrinsic values".[1][2][3] It could also be described as a trade in products or assets with inflated values. While some economists deny that bubbles occur,[4][page needed] the cause of bubbles remains a challenge to those who are convinced that asset prices often deviate strongly from intrinsic values. While many explanations have been suggested, it has been recently shown that bubbles appear even without uncertainty,[5] speculation,[6] or bounded rationality.[7] It has also been suggested that bubbles might ultimately be caused by processes of price coordination[8] or emerging social norms.[7] Because it is often difficult to observe intrinsic values in real-life markets, bubbles are often conclusively identified only in retrospect, when a sudden drop in prices appears. Such a drop is known as a crash or a bubble burst. Both the boom and the burst phases of the bubble are examples of a positive feedback mechanism, in contrast to the negative feedback mechanism that determines the equilibrium price under normal market circumstances. Prices in an economic bubble can fluctuate erratically, and become impossible to predict from supply and demand alone.