Great, we have a few more convinced not to use Path. One application will now have perhaps a few hundred less users. What about the rest of the permission-hungry apps? Whatsapp? Facebook? Any Google app? Any other big developer's app? What if the founders of Path just start a new company?

Not installing Path is not a solution here. You gotta look critically at the permissions an app uses and their terms of service (at least skip to the privacy related issues, though they usually try to hide and obfuscate them). If there is something you don't entirely trust, wonder why you really need that app. Perhaps it's an improvement for your life, but can't you really live without? You've gone without that app for the past how many years? Is it worth giving up your phone book and all sdcard contents?

You're correct, and it gives me the shivers to see an application like 'photo sharing' wanting several useless permissions

Here's what I would like: for Android to allow me to deny or ask for a confirmation for each permission of these.

Or ask upon usage. "Do you want to grant XYZ to view your contact list? [Yes, and don't ask again] [Just this time] [Never]"