My guitarist's back in the late 60's and
early 70's all thought they needed a Fender Twin or a Super-Reverb.
Each of those CRUSHED my Dual Showman without even trying. Those
were the bad old days in my book.
My recollection maybe fuzzy but I could
swear both those amps had volume controls. Just requires a musician
that knows how to use them.
Now, now, no need for feigned memory-loss. I'm sure you know that
young guitarists in 1970, whose idols were Page, Clapton, Hendrix, etc.,
might have tended to play loud. Might.
Some of those kids have probably grown into actual musicians by now.
But expecting teens to play rock softly seems silly, IMHO.
In any case you are of course correct, and guitarists are commonly
known to play through small tube rigs now, but you will probably find
the volume up pretty high.
That argues for your assertion that we all just need small bass rigs.
The problem is that it is only true part of the time. When a drummer,
a PA carrying 3 voices, and two modest guitar rigs are in full cry at a
musically exciting level (let's say about as loud as a marching band or
a symphony orchestra), the bass has to musically balance. Obviously it
also has to happen in a vast array of acoustic spaces with widely
varying amounts of crowd noise.
We are up against simple psycho-acoustics--Fletcher-Munson curves, anyone?
http://en.wikipedia.org/wiki/Equal-loudness_contour
Furthermore, power is overrated!

Paraphrasing a JBL tech manual:
Psychoacoustically, a ten-times increase in power results in a level
which most people judge to be twice as loud. Thus, a 2000-watt
acoustical signal would be twice as loud as a 200-watt signal, and a
200-watt signal would be twice as loud as a 20-watt signal.
[Invalid or Expired Link Removed]
Let's assume the same unstated constants as the above JBL factoid
(whatever power rating method at whatever freq, etc.) for both my
amps. One is 350 watts into 4 ohms, the other is 1200 watts bridged
mono into 4 ohms. The 1200 watt amp is not a lot "louder" than the 350,
and it is certainly not "twice as loud," which would require 3500 watts (theoretically).
In my experience, the power I need is different in every space and
with every band I play. Having too much means I have enough. Having
too little means I hurt the music.
If we were all just playing chamber music concerts in good acoustic
spaces, things would be easier, right?
