On the other hand, with socially optimal traffic patterns there would be induced demand and more drivers would come on the roads and potentially use Waze.

It's actually difficult to know what would make Waze better off, providing socially optimal routes or individually optimal routes.

Waze might also behave like many companies and ask for subsidies from local governments for turning on the social optimization, and the local governments are ill-equiped to know how much to pay.