My paper implies that the most "efficient" network configuration (at least from a superficial perspective) is a single miner in a large data center. No one is disputing this fact. No one is also disputing the fact that a monopoly miner like this has the ability to censor transactions and to double-spend (and earn a greater profit this way too).
Will mining centralize around one single miner? No one knows. This is why Bitcoin is still a risk.
But if this doesn't happen--if there remains more than a single miner--then the fee market does exist.
Great, but that's completely irrelevant to the decisions we have to make. In fact it strongly suggest against removing entirely the block size cap so you should really stop pulling up this material as it absolutely does not support your position.
What you essentially propose is to see "how far" the miners will be willing to centralize toward "the most efficient network configuration"My paper says nothing about this. It just shows that a transaction fee market exists without a block size limit
assuming the network isn't already centered around a single miner. Now
on to a topic outside of the scope of that paper: You are under the impression that increasing the block size limit will for some reason lead to more centralization (which I don't understand--there's "centralization pressure" at any block size limit). I, on the other hand, see this as allowing Bitcoin to grow and gain new users, new nodes, new miners, and in general protection in numbers.
Furthermore, you're scheme of implementing a production quota on block size requires centralized control to enforce the quota. You have said it
yourself that we need a centrally-planned limit to keep Bitcoin decentralized. Do you not find that logic absurd?