I mean it differently, in that they shape it not only through their actions, but in a more GM like manner, creating NPCs and locations.
My point still stands
But yeah I get what you mean. But it still depends on your playstyle. I do encourage my players to co-shape the world around them. They don't have to ask whether there is a mug or not, they just describe grabbing one from that table and smashing it on that guy's head. I only interfere if what the players describe contadicts my plot or a specific idea I have of the NPC or the environment. I wouldn't care if they simply created a settlement they encounter completely on their own, organically while playing. Reasonable players don't abuse that, because it robs them of their own fun.
I also had to realize that systems or mechanics won't really encourage lazy players to describe or participate more. I introduced the Exalted stunt system into my D&D campaign, which gives the players bonuses on rolls or even bonus-XP, if they describe a great action in a cool and elaborate manner, but still some of my players will still stick with "I make a 5-foot step here, attack the left ork, get my flanking bonus, and then the other ork because my Blabla feat lets me do that, when these and those conditions are met" ...
I know that some people are better in describing what their character does and feels than others, but I would obviously factor that in.
And the guys, who like describing don't even ask for a stunt bonus.
So I think that Karma system would need some field testing. It's a cool idea to give the players this kind of power within specific limits, but I'm not 100% sure they will excessively use it... :-/