But at least I'm happy that you consider block size just as well a hard economic parameter as inflation rate. I think that the block size limit as an economic parameter, introducing scarcity of transaction room, was a stupid thing to do in bitcoin's design, but so is its inflation rate. So, bitcoin being designed as a system with a scarce and finite number of coins, I don't see the problem with bitcoin as a system with a finite and scarce number of transactions per unit of time. I have to say I think the economic model of both is stupid if the idea was to make a currency, but then, that's how bitcoin was designed, and I think that is the way it should live its life. The economic design looks more like the one for "exclusive famous paintings" which are rare to come by, and difficult to transact, in other words, a kind of highly speculative and not very liquid asset with high price that is rarely moved, and only to move big amounts of value (not a currency at all, but a "settlement layer for rich guys doing things where fiat cannot go").
This is a typical error that people make. First of all, a block have nothing to do with economics. It is an accountancy thing. Double book-keeping with 2 columns; Expenditure and Income. In Bitcoin it is; Input and Output. The original blocksize was 32mb and the 1mb was temporary anti-spam measure.
If one puts a hard limit on something, you make it artificially scarce. One has put an artificial limit on the number of bitcoins that are made. Nothing technical would stop you from making more of them. Changing the >>= into <<= in the calculation of the coinbase reward is all that is needed to have doublings instead of halvings every 210 000 blocks. But one put halvings, to make bitcoins artificially scarce and hence expensive.
Whether this was the intention or not, one did the same with the number of transactions by limiting the amount of produced transaction room to 1 MB/10 minutes. This could actually be a very smart move, because the scarcity of transaction room makes it expensive: the fees. Given that sooner or later, the whole of bitcoin's PoW security must be paid by fees, it wouldn't be crazy to make fees expensive.
Why 1 MB and not 10 MB ? That's similar to "why 21 million coins and not 210 million coins ?". Arbitrary choice of scarcity. But it *is* a scarcity parameter, and its price is the fee, like the number of bitcoins is scarce and its price is the market price of a coin.
A company does not limited its sales according to the double book-keeping size. Sales are limited by the goods/services they have on offer - economic. The original limit of 32mb was a good one and allows adoptions to grow naturally over a decade or more before reaching the limit. Thus there is plenty of time to solve the capacity/scaling issue before the limit is reached.
I agree with you on the idea that *if bitcoin were not to be scarce in transactions*,
but it wasn't designed that way.
I also think that the uncapped value of bitcoin is wrong. I think bitcoin's value should be regulated automatically (I already said how). But no, people want scarce coins that can go moon. Well, they also have scarce transaction room that can go moon too.Both of these are bad for a currency. A currency should have fluid transactions, and should have stable value.
Bitcoin is designed to have speculative value by scarcity of coins, and is equally designed to have expensive transactions by scarcity of room. The coin emission lowers, the transaction "emission" is constant. Hell, it would even be funny if block SIZE halved also every 210 000 blocks ! Then the total block chain would have finite length and the last transaction would take place in some 10s of years when the block size drops under 1 KB, in the same way as the emission rate drops under 1 Satoshi.
Can't help it that it is designed that way, even if it was not intended that way.
Rocket, propeller - engineering not accountancy, so a bad example, but i see what you were trying to do. The intended and designed outcome was 32mb. The desirable outcome of having 32mb was that it would take a decade or more to reach the 32mb limit, thus allowing developers plenty of time to come up with new solutions/features to expand capacity and scaling before the 32mb limit is reached. Satoshi intended the 1mb to be temporary but
had different ideas. Thus the actual outcome has changed because of
not Satoshi. You shouldn't confused the intention, design, desire of Satoshi, with the present developers' desire thus creating a different "actual outcome."