The thing that burnt the poster is that while a social app asking for access to their contacts might not rise a brow, the user has no way to know what they are going to do with that data without looking at the reviews or around the internet for complaints/testimonials.
Yes and no. Google often hides the most offensive permission requests under that "see more" arrow. And the permission requests (and accompanying explanations) are too vague and ambiguous. For example: Does "request access to network" mean they're able to sniff all my incoming/outgoing data, granting the app access to everything?
It's got the title and button at the top, taking up a large chunk of space (1/3rd on my Nexus 4), and then a vague list of - to most users - technical-sounding "stuff".
My guess is a large majority of users never look past the button.
Go to play.google.com. Search for path. First result in the app store. Click on Permissions.
"This application has access to the following:
... blah blah blah ...
This permission allows the app to use the camera at any time without your confirmation.
... blah blah blah ...
read your contacts Allows the app to read data about your contacts stored on your tablet
... blah blah blah ...
read call log Allows the app to read your tablet's call log, including data about incoming and outgoing calls.
... blah blah blah ...
Now users have been trained to click "yes" to all requests without even reading them, so I you can get into philosophical arguments about if the "really" have permissions. Just like most users randomly click thru "click thru licences".
I'd assume the reason Google is somewhat hesitant to offer this officially is that many apps don't deal well with this -- some do degrade gracefully, while others end up throwing task-ending exceptions because the app code just never planned for not being able to do some task which requires permissions declared in the manifest.
Every app already has to consider the case of GPS being unavailable indoors, the contact list only having one person (yourself) in it, or the camera picture being black in darkness.
I'm sure some apps will fail anyway because they just never expected a contact list of 0 entries, but the list should be much smaller in that situation (mostly limited to those who do virtually no QA).
It would be easy enough for developers to catch security exceptions that Google would find little or no developer fall-off due to a requirement like this.
<uses-permission android:name="android.permission.READ_CONTACTS"/>
and the installer will prompt the user for that permission when they install the app.