I think you're on the right track with that idea.  Here's a metaphor that might be related to this whole issue:

If demand for wheat increases, the price of wheat increases too because, of course, there's a limited supply of wheat.  The increased price encourages farmers to grow more wheat and make more investment in tractors and equipment.  Higher wheat prices encourage more people to become wheat farmers when they see that the wheat business has become more lucrative.  With the increased supply of wheat that results from its increased production, consumer prices begin to fall.  Overall, the economy ends up with a much larger supply of wheat at the most competitive price possible.  Production is maximized, farmers' profits are maximized, and consumer prices are minimized.

I know the block size issue is more complex due to things like hard drive space, but the relationships between supply, demand, production, and price seem important to the problem at hand.