[JoshuaDavid]

That argument proves too much, I think. It seems analogous to the question of "Why would anyone ever want higher taxes? If they think the optimal tax rate is higher, they can just pay more taxes."

If one company takes a more principled approach to moderation, and that more principled approach is harmful to revenue, that company will be outcompeted by companies with whatever moderation policies optimize for engagement / revenue / growth. As a result, in the absence of legislation, you get adverse selection i.e. the dominant platforms will be the ones that optimize for engagement/revenue/growth, rather than the ones with good moderation policies.

If you instead have legislation for what "good moderation" looks like, it applies equally to all companies and mitigates the adverse selection problem.

Of course, it is still entirely possible for bad legislation to introduce worse problems than the adverse selection problem. It depends on the object level of what exactly the legislation is, rather than being a blanket "legislation bad" or "legislation good" sort of thing.