I'm not saying a desire for privacy is paranoid, but the assumption that the government will engage in passive monitoring and archival of everything that can be captured through the microphone and use it as leverage later, even if it doesn't involve criminal liability, eg 'assist us without nefarious purpose or we will use something we recorded to cause you acute embarrassment with devastating social consequences.' I'm not saying this won't happen, but that it won't happen enough for most people to care.

But to address the gist of what you say, I think you assume an understanding of data security that is far beyond most end users.

I don't think I do. I've met plenty of non-technical people who worry about the possibility that their phone could record them when its swtiched off or suchlike - you don't need to understand how something functions in order to understand its potential as an instrumentality. But unless you have a fundamentally antagonist view of government (which most people in the US don't) then there's little overlap between the set of 'stuff the government could do me' and that of 'stuff that would advance the government's purpose' for the average person. This is what I mean when I say most people don't feel culpable enough; there isn't anything sufficiently illegal going on in their lives that they perceive a significant government interest in intruding upon them in the first place.

When I talk about paranoia I mean the idea that government is going to fuck with you no matter how blameless of a life you lead, and that the more blameless you are the less leverage you will have to push back against the inevitable intrusion. In other words, they overestimate the probability of oppression just as optimistic or authoritarian people may underestimate it, depending on context. While that possibility certainly exists, I think something like this Amazon product only marginally increases it because anyone who buys this probably already has a smartphone and keeps it close by at all times already.