Substack isn't a social network. Discussion is just a function of a post's comments, which can always be disabled. If you don't like a blog, you can leave and go to another. There's no real cross-pollination. I suppose the "bad" blogs could hurt Substack's reputation, but they're willing to bear the reputational damage rather than shut it down, which I respect.

Since you initially brought up Reddit, it's worth examining whether healthy discussions are happening there. If you've ever used reveddit, you can see the types of censorship that happens on popular threads. Activist moderators are everywhere. The only reason discussion looks healthy is because anything remotely "controversial" is nipped in the bud before 100 others had a chance to upvote or agree with it. A thread's apparent civility is not always an indication of healthy discussion.

My point is there are negative externalities no matter how far you move the dial on moderation/censorship. Not enough moderation, and you discourage real discussion but encourage toxicity, harassment, and trolling, i.e., 4chan and Parler. Too much moderation, and you also discourage real discussion but encourage censorship, intolerance, and groupthink, i.e., Reddit in 2023.