The beauty of the second algorithm for rating products is that it is straightforward. Having never seen it before I can deduce that 5 stars come before 4 stars and more reviews come before fewer. If I want to skip ahead to the 4 stars I know what to do. I can internalize the sorting algorithm easily. And as a user, understanding the order items are presented to me is important.
If Amazon were to use the last algorithm and present items in that order (assuming we accounted for the 5 star vs positive/negative issue), it would like a random order to most users and would be frustrating.
So I guess what I am saying is that this algorithm is very clever, but in some cases, it may be too clever. Sometimes you just want to keep it Simple Stupid.