I spend some of my time talking to established media folks about new media. What I quickly realized is that there is a lot of ego involved.
Big budgets are basically a matter of ego. Directors, writers, actors...heck just about anyone...never wants to work for less than their last project. If everyone is looking for bigger and bigger projects you get the cost inflation we have seen over the last 2 decades.
Yes, lower budgets and higher earnings could benefit everyone, but the human ego is a powerful thing that often makes us do things not in our own best interest.