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).
Well, I think there are other attributes that give value to Bitcoin. Such as scarcity and fungibility (which are not affected by block size) and liquidity (which is).
High fees make Bitcoin less liquid, and thus, less valuable. And, as a consequence, smaller block size limit does not necessarily mean more real income to miners.
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.
This is assuming mining is always primarily bandwith-constrained (as opposed to energy price constrained).
I think mining ops will in any case tend to either grow bigger or die. Economies of scale.