What if you clean up the basement of your dead great grandpa and you find a big fat chest full to the brim with gold and you sell it for say 100 million and you are obliged to register that sale with financial authorities and then, yes then, they tell you that the gold was acquired by your great grandpa 110 years ago and there is a law stating that when something is lying around dormant for >109 years, it automatically belongs to the public and must be returned to public treasury, what then? Honest question, what would you think?
I think there is already something like this. It is called the Copyright Act, and its relative Copyright Term Extension Act. It gives us the possibility to channel work into the public domain.
An implementation like this would prevent previous work to be directly wasted through loss of coins. Rather, the reward of that work would be reintroduced into the network through additional work, new mining for missing coins. This additional work would "pay the price" for having lost them in the first place, while maintaining a fixed amount of circulating coins.
Whatever, but if I understand you correctly, that still doesn't the situation for the great grandson right? He finds the chest with 100 million USD worth of gold after 110 years and it is not his anymore? Whether someone + their successors arbitrarily decide to keep it for more than 109 years or whether is lost doesn't matter? I mean what if I just don't want to sell but keep it as part of my diversified portfolio? What happens then after 109 years?
Bitcoin can also be noted in mBTC and satoshi. I am confident that whatever gets lost over the decades to come, there will always be enough satoshis so serve Bitcoin's purposes.
It is not that I don't get the problem you are describing, but it is a very delicate topic as it goes straight to the core fundamentals of Bitcoin which as of now essentially are the value proposition.