Block size is a physical constraint, not an optimization mechanism. It limits throughput, it doesn’t decide what should occupy that space. Even with smaller blocks, you can still end up with blocks packed full of spam. That pushes monetary transactions into the backlog and raises the cost of getting them confirmed. The constraint alone doesn’t guarantee the space is used for the purpose Bitcoin was built for. It only guarantees that competition for that space becomes more expensive. As we’ve seen, fees don’t outprice spam.