Merging people's writing together doesn't seem to be as obvious as merging people's code together -- code is a means to an end, so whatever is the best solution should be merged into master. Writing is subjective, so if your paragraphs cause a merge issue, its not so simple to choose a winner.
You also have to consider that conventional version control was designed specifically for programming code where diffs are done per line (as each line in programming typically serves a single purpose, e.g. assigning a variable). With written language however, that is typically less true. You would only put line breaks after paragraphs and such. Most of the line breaks end up being automatic margin wraps which serve n…
I think this is why formats like Markdown eat newlines, and need two consecutive newlines to produce a paragraph break. This allows you to split paragraphs in smaller chunks, sentences or sub-sentences, hopefully approaching the situation with programming code where line diffs work.