how come Bitcoin doesn't have a larger block size?
The block is limited in size to PREVENT a monopoly.
More importantly, there isn't a specific size that is the "right size". It could be smaller, it could be bigger.
It already IS bigger than it would be if it was smaller. You might want it bigger than that, but no matter what size you pick, there will probably be someone else that wants it even bigger than that.
In the end, the issue of transaction volume isn't solvable by increasing block size, so why bother increasing it at all? It's already working just fine at the current size. To scale the quantity of transaction it is better to look to alternative solutions such as Lightning Network and/or off-chain transactions for those cases where such transactions make sense.
My personal opinion,
You increase onchain transaction capacity
1. To keep the blockchain fees affordable
2. To keep transaction process timely so you are not waiting days for a transaction to cmplete
Small point, no matter how fast an offchain solution is, if the onchain capacity fails so too will the offchain.
As their are known dangers to offchain , if the onchain does not broadcast withdrawal info in a timely fashion.
So at some point onchain must be improved or even offchain faces failure.
Also using LN only makes sense if you are transacting multiple times between the same people.
The normal way people pay for gas or food or rent, is weekly, daily, or monthly, but not the 100s of times needed to make LN worth it.
Only Banks process thousands to millions of transactions per day that would really be advantageous to use LN.