True, it could have negative consequences. But aren't the negative consequences of the current system even worse?

Let's say it takes a permission to play sound. If you don't tell the app they can't play sound they may spend a lot of CPU and battery generating music that no one will ever hear.

So the phone uses more CPU and battery. It's not that big of a deal.

Or if you stub in the photo APIs, what does an app do when it tries to find a photo to show and the user said "no". Should Android pretend there are no pictures? Return some fake stock pictures?

Yes, Android can tell the app that there are no photos.

If you fake GPS data than if the user accidentally turns off location access on an application that needs it the app has no way to inform the user that it won't work well. As far as your run logging software knows you are now just running on the same treadmill for the rest of your life.

We are all accustomed to using GPS-related apps when we have no GPS signal. How is this any different?