If we don't have flagging how could be prevent spam posts and scam posts to spread? Steemit would be a copy paste paradise, a useless mass where you couldn't find anything.
There are problems with flagging, but there are the same problems with upvoting. If somebody have more upvotes that is more visible, we should ban upvoting too, because it is also some kind of censorship.
I think the upvoting works. You only have so much voting power. It's up to you what you vote on. Flagging makes it harder for others to get a chance to upvote your stuff. If you see spam or scam you can always mute them so you don't have to see them. We don't need others telling us what we should and shouldn't see.
I see your point.
But I think muting is not enough powerful. It is something similar with emails. Why would you need a spam filter/junkmail folder, if you can just simply delete the junk mails.
I think it works similar in steemit.
That also true the current voting system has some weaknesses, but I think with time it will be fine tuned.