I agree, in as much as that was the best possible course of action at that point.Ultimately, clearing the perpetrator and shooting him instantly was a good choice because at the time, they had no idea the vest was a fake.
...Job well done. And congratulations to the concerned citizens for mobbing him and taking his knife. Well done, Londoners..!
On the other hand, it would be a shame to just call it a day and make no attempt at finding out the root causes of that behavior and engaging in a bit of prevention, hopefully in a humane way.
Of course I don't know what that would mean in practice, although I have my hunches. I wonder what exists in the way of efforts at integration in London.