I’m skeptical of the claim that an average person has the power to ruin someone’s reputation as a punishment for wrongdoing.
If you read my comment, you'll realize that it is explicitly in the context of a small tightly knit community. If they decide to leave the community, then that's a win for the community, now we don't have to deal with the bad actor anymore.
Our society is large and extremely anonymous
If you pay close attention, that was exactly my comment. That is the problem with our current society, not the principal/agent problem. That is just a society. We evolved in a world where you hardly had to keep up with a handful of individuals, maybe meet less than 500 people your entire life. We are not fit for a world with 8 billion+ of us and you can potentially interact with millions of them directly with a tiny glass device in your pocket. That is not something we are good at. We are good at forming strong bonds and meaning relationships with a handful of people who you can sort of trust almost completely at all times, and they will in turn relay you information about who amongst the strangers to trust or not. It is the fundamental basis of gossip.