When the hard limit starts to constrain Bitcoin's usefulness
The hard limit on block size is what
gives Bitcoin its most important attribute: The blockchain with the largest amount of hashing power. Increasing the block size reduces total hashing power (because it drives fees down).
this will tend to cause a decrease in Bitcoin's value, and thus, a decrease in miners' real profit. So, eventually, miners are going to want to increase the limit.
Wrong on all counts. Its in the miners' best interests to NOT raise the limit since the limit is what drives fees. The only miners who benefit from an increase in the block size are the ones with the most bandwidth, since a limit increase will kill off the smallest competitors.
Yeah, well, it is also in miners' best interest to maintain the reward at 50. Or to keep the difficulty at 1000. But they can't have that, can they? Why? Because that's not how it works.
If the block size can adapt variably and in a self-regulating way, similar to how difficulty works, then it will just be part of how the business of bitcoin is done. It will also have a certain elegance and symmetry, which is very appealing.