Flagging and upvoting are actually both using free market principles. You are not paying someone with your upvote and you are not robbing people with your downvote you are helping to decide how much of the reward pool they get. When you upvote, you say that they should get more, when you downvote (flag), you are saying that they should get less of the reward pool and more should go to other people. The more steem power you have, the more weight your vote has. At the end of the seven days the post is paid out with whatever the community decided it should be paid.

In this current "war" we have a whale that decided that they wanted to vote to give a large portion of the reward pool to @haejin. He has every right to do this. We then had another whale @berniesanders who decided that they wanted less of the reward pool to go to @haejin and more to be paid to everyone else. He also has every right to do this. Where this gets unethical (or abusing flagging power) is when a post is voted to $0 or when @haejin retaliates by downvoting posts out of spite.

People are tending to feel entitled to their potential rewards. Then when they get flagged they feel like it is a personal attack. We all need to be more comfortable with the downvote. It is a critical part of the steem ecosystem and needs to be used by everyone but not abused as it has been by people on both sides of this "war"