...I think it's because there aren't any real drawbacks to not expanding...
This is a good point and I had the thought too. I would be likewise satisfied with a balancing solution that gave more of an opportunity cost to "playing it safe". Right now the only opportunity cost most of the game to staying smaller is reduced hammer output. Your kingdom is more defensible, but in a prolonged war you are at a disadvantage. This is really the only disadvantage is war though, because a fast tall game is typically ending by the time a comparable wide empire is surpassing them in tech. The reason is there isn't enough happiness to grow your cities very big till ideologies. At least that's my opinion.
Some people would say the hammer advantage is enough to going wide and that it should be more difficult to manage, and I agree, but I'm not so sure it is balanced from a difficulty standpoint. It takes a big learning curve to learn to play wide/liberty effectively, including a fair bit of optimization and micromanagement, and it seems you are struggling directly AGAINST features rather than following an alterate gameplay strategy. To overcome the problems you need to monitor your cities, keep on top of local happiness, avoid growth frequently, predict future balance, buy more buildings, defend much more effectively, need a larger military, etc. From what I hear from the average players starting to try to learn to play wide it is not intuitive or easy for them to pick up for this reason. So yeah, for us that have played a lot both styles of play feel balanced (my complaints are more that I can't technically REX even micromanaging, but in the range of 10-15 cities liberty feels pretty good), but you have to admit going wide takes a LOT more skill and I'm sure it could have been designed to be more intuitive so newer players see the benefits and learn the play without having to ask for a walkthrough on the forums. I've seen so many players complain that they are deadlocked into playing small due to the difficulty, failed attempts at wide, and the fact that tradition is so tempting due to the fast early bonuses.
In my opinion technical balance is less important then gameplay. This game needs to feel good to all levels of players not just experienced ones. They could have made wider play more accessible to new players by
a) making liberty have comparable early bonuses so the opportunity cost of choosing one tree over the other is less. Liberty is great but you have to quickly settle and get many cities before you see it. Due to happiness and other issues most players don't expand fast enough to see how good it is so many players call it "weak" even though it technically isn't. Liberty gives the tools to expand rapidly and build infrastructure but the gold and happiness you need to do it that fast are buried down at the end. It should have been reversed in my opinion. Most players expand when they have the happiness and money to do so thus it is not loved.
b) rather than always harsh penalties per new city, something, even something small, that got better with each city would be a nice opportunity cost to not expanding. Right now the only initial thing that gets better is a new city to produce stuff. They've taken away all the other bonuses till you can surpass the penalties which with science can happen relatively quickly if you have money to buy the buildings, but for culture takes awhile. Since most new cities are building loads of buildings for many turns this hammer advantage doesn't feel that useful and again, the benefits are deferred for most of the game. Tiny newer cities rarely have the capacity to produce military units quickly or do something useful till built up and it's the building up part that new players have trouble with as it is, admittedly slow and made slower by needing to build happiness building frequently to grow it to a decent enough size it is useful.
The one main early advantage to new cities is Extra sellable resources/luxes does this, and it's basically the only way liberty can get the money to support itself early till the advanced monetary buildings (banks+), but that's a bit convoluted and newer players sometimes don't realize this and go into financial red and struggle with growth. I personally think a really nice and realistic balance to give liberty would be BETTER gold options than tradition. It makes sense. Large empires should be wealthier. City connections can do this to a small extent but usually they just barely cover all the maintenance costs on buildings. Something in liberty that either 1) made maintenance cheaper with more cities or 2) generated more gold given a larger empire would be very balanced and good gameplay. You have to buy/support so much more in liberty it really should have more money and this is realistically what would happen as well. A way to do this would be to make trade routes a function of number of cities. Maybe for every 4 cities you build you get an extra trade route. Makes sense and solves the gold problem. Might make liberty too easy for us pros but it's be just about perfect to addressing a big liberty issue for the average player. More cities/population should realistically translate to more trade and tax income. I don't think it should ever be the case that the tall player can generate as much money as the wide.
c) A bit off-topic but another thing that would address liberty problems would be if new pop 1 cities did not affect the science/culture/#cities penalties until they grew to size 2-3 or so. Size 1-2 cities are not very useful so it isn't too unbalanced and allows you to fill in your land a bit better with smaller towns on "avoid growth". also it makes it so that the settling penalties are delayed till you actually try to do something with the city giving you time to connect luxuries and a bit more freedom to manage. New players could settle easier, taking advantage of that early space and cheap settlers, and deal with the penalties with a bit more time rather than going into major unhappiness immediately which tends to force new players to NOT capitalize on the liberty bonuses. Being able to produce many tiny 1-2 population cities is not terrible helpful as they are usually producing less then they cost at this stage, plus they are extremely vulnerable to military invasion and are conquered quickly so I don't think it would be OP delaying the penalties till the city grew once. It's like the logic that every new hamlet shouldn't cost the government money but once it registers as a town and is receiving maintenance support from the crown, then it matters.
What do you guys think?