Your argument, whilst certainly credible, is similar to arguing in favour of the minimum wage because not having one causes a race to the bottom among desperate workers, and thus output quality will suffer. This is possible, but I think in practice some natural equilibrium might be found if we allowed it to be, where the overall dynamic of the platform improved.
To manage the transition, perhaps we could initially limit the curation to a 75% maximum for example.
Unlike some proposals, this doesn't look to be too difficult to implement from a blockchain perspective either.
I agree that supply and demand will eventually reach an equilibrium. However the asymmetry in the distribution of Steem Power may push that point in favor of the large accounts at the expense of content producers.
There may be other business cases that are not centered around content production that could greatly benefit from a totally flexible allocation of rewards. In the end this may outweigh the possible negative effects. After all the Steem blockchain can be used for much more than social media or blogging.
That's true enough. The distribution could have a negative influence on where the equilibrium settles. The recent trend in greater whale delegation may reduce the impact of that too though by somewhat equalising the effective vote power distribution.