Negative feedback is a process whereby outputs from a system act to reduce, counteract, or moderate the effects of the system’s inputs on a subsequent iteration. This process, which occurs in both natural and mechanical systems, is known as “negative feedback” since it works to prevent any changes to the scope or intensity of the system’s operations, thus setting up an inherent stabilizing mechanism.

This feedback loop is often seen in the market, where investors employ a negative feedback strategy to reduce market volatility. These investors tend to buy assets when prices fall and sell them when prices rise, so that any inputs to the system (such as the demand for the asset) are mitigated or counteracted by the additional output (the buyers’ or sellers’ actions). This process of buying and selling lessens the intensity of any price fluctuations and steadies the market, reducing the degree of volatility.

Negative feedback also has applications in engineering and technology, particularly in relation to control systems. Negative feedback loops are critical to any system that needs to maintain a steady state or reach a target, as they actively work to reduce the gap between the ideal state and the actual conditions. The process of measurement, followed by correction and return, is designed to provide a consistent output free of damaging fluctuations. Examples of systems to which this approach is applied include heating and cooling systems, devices that detect the suspension of the Earth’s magnetic field, and even spacecraft control systems.

Negative feedback is sometimes mistakenly referred to as a “self-perpetuating downward spiral” where an initial bad event is exacerbated by the ensuing negative behaviors. In fact, this constitutes a positive feedback loop, whereby the subsequent bad behaviors actually serve to enhance the original negative situation.

In conclusion, negative feedback is an important homeostatic component of natural and mechanical systems. This process works to reduce the effect of inputs upon a system and steers it towards a more constant or predictable result. Consequently, negative feedback loops are highly employed in a wide variety of markets and technology applications.