While I agree with your last statement, I don't think the author made a mistake. His point here is that privacy is about more than protecting the individual for the individual's sake.
In context of the preceding paragraphs:
Etzioni viewed privacy as a battle between the interests of individuals and society.
Dewey proposed that privacy is also a social interest, not just an individual interest.
The author is agreeing with the latter: "the value of protecting the individual is a social one."
Really, this means both of your interpretations. A society with privacy values protecting individuals from some of its other norms and values.
I've never heard of these people before reading this, and I'm not trying to be pedantic. Just my textual interpretation.
[edit - for clarity, but I may have made it worse.]
In context of the preceding paragraphs:
Etzioni viewed privacy as a battle between the interests of individuals and society.
Dewey proposed that privacy is also a social interest, not just an individual interest.
The author is agreeing with the latter: "the value of protecting the individual is a social one."
Really, this means both of your interpretations. A society with privacy values protecting individuals from some of its other norms and values.
I've never heard of these people before reading this, and I'm not trying to be pedantic. Just my textual interpretation.
[edit - for clarity, but I may have made it worse.]