I posted this over at r/bitcoin, but I'd like to see more discussion on the topic here.

Right now, the cost of a transaction is arbitrary: you can pay the "recommended fee", a smaller fee, or no fee. Regardless, there's no reliable way of knowing when your transaction will be confirmed. In other words, the market has not yet been able to price confirmation times. I believe this is directly related to the blocksize issue, and that keeping the blocksize where it is should force the market to price transaction times. I would like to know if this reasoning makes sense:

The blocksize provides an artificial scarcity that will eventually force miners to prioritize based on transaction fees. However, slower miners know they can't compete with faster miners for the highest fees. Instead of simply shutting off their machines, a (rational) slower miner should instead optimize for a range of smaller fees that they have a reasonable chance of capturing (using their cheaper equipment). As a consequence, slower miners could stay in business, competing with each other in order to provide value for those who choose to pay less for longer wait times, based on the individual consumer or business' time preference. Competition at all tx price levels would result in a stable tx price as a function of tx time. Raising the limit will postpone the pricing of transaction times until the next limit is reached. Removing the limit entirely will prevent this state from being realized, and we will never know how long it should take to get a tx confirmed.

No other system of exchange has priced transaction times, so it's yet another feature bitcoin would have that others don't. What's more, we would get this feature for free, without having to do a hard fork. Please correct me if my reasoning is flawed or if I've missed some crucial aspect of the protocol that makes this impossible.

tl;dr I argue we should keep the blocksize where it is: the market will respond by pricing transaction times, which is a feature we could all use!