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Imagine how that would make life for developers, forced to deal with the combinatorial explosion of revoked permissions.

You mean exactly like how it's going to be on iOS when 6 lands? Developers are smart. They'll engineer their apps to live if permission is revoked.

Developers produce bugs all the time.

there are a lot more permissions in Android than there are in iOS http://developer.android.com/reference/android/Manifest.perm...

They could be bundled and not all permissions have to be interactively granted, just the ones that could do the most harm.