Just found a simple equation to balance supply and demand that could be easily introduced in btc source code:
next block size limit = previous block size limit + (total fee in the last period / avg fee in the previous period - space used in the last period) / block occupancy rate for the last period
Your equation does nothing to address the
issue I brought up previously. Miners can and do receive transaction fees in ways that are not attached to the transaction. For example, viaBTC offers a paid transaction accelerator
service for people who have attached too low of fees to their transaction. They charge a fortune for this service, so it is not widely used, but if pools have incentives to show transactions having lower fees than is actually the case, you can guarantee more pools would offer this service, and the cost would be very low.