Answering here

The reason no one is powering up is because Steemit isn't positioning itself as a company trying to profit from power ups

That's definetely not the reason. Everything is free in the social media stuff, if you gonna start charging people it's a failed business model from the start. Steemit has an advantage over other in that it actually pays .The reason is that people think that it is not worth it to power up, lose 10% of their investment every year, lock their money for 2 year for what? for merely being able to earn a few pennies through curation rewards.

But does that work in any economy where you can just change one parameter and everything fixes?

As i already said steem is a complexe system trying to fix problem that don't exist. The hyperinflation has no purpose at all in the system so does the lock time period, so yeah you can definetely improve things by making them more simple and most importantly more attractive to investors. ( today investors are on the bench)

Demand is non-existent. Maybe if there was demand then reducing the supply could be discussed but when there is no demand then it doesn't make a difference how much inflation you have.

Inflation + no demand = steem at 0.00001 soon

If there was no demand and no inflation then the price would sustain better.

But ultimately the goal would be to achieve no inflation and demand so that the company ( platform) gain value over time.