You point to just how this misses the most important point: “…agreeing on what constitutes the collective good is very hard indeed.”
No private company can be permitted to attempt that, even under the most careful regulation - especially in a democracy. We need a free market in filters from a diversity of providers - for users to choose from. In that way, our marketplace of ideas - composed of assemblages of human actors - can decide, as we have done for centuries. As you say, people SHOULD be trusted. That is why we need to FREE OUR FEEDS!
There are proposals to do just that – and Twitter is investigating that in its Bluesky initiative. I recently posted a summary of notable proposals along those lines from several sources (at http://bit.ly/SavDem0 - soon to expanded and updated).
[Update 4/1: A slightly expanded comment is now a separate story on Medium.]