I have no opinion on New York and its implementation of the theory but I think it's indeed very clear that the theory applies to community management.
I manage an instant messaging community of about 10000 stem professionals and you can see negative community feedback loops develop or die down in real time depending on how you act on them. It's evident new members take in the vibe when they arrive and act to reinforce good or bad trends. If you let people make crass jokes, soon they're posting rude comments then insulting each others. If you let people post memes about technical topics, soon it's random tiktok videos, then it's porn. If you let a regular member go off on a newbie who asks a bad question, the next thing you know people are bullying newcomers left and right.
All I wanted was to build a nice virtual gathering spot and meet cool people but now I have to play fascist because the feedback effect is so strong.