In the first place, national parties deal with national issues. Local issues are the responsibility of local, or perhaps provincial, government, and therefore a multitude of local constituencies is not required at the national level.
Secondly, the great majority of people vote for the party, not the candidate, so as long as a region is fairly represented, it doesn't require a multitude of voices saying essentially the same thing.
And finally, in the House of Commons, all the members of the same party vote the same way. Once the regions are proportionately represented, any more votes are just echoes.
Efficiency, i.e. respect for the taxpayer's dollar, demands that we achieve equitable representation for the regions at the least cost, and that means the least number of MPs. And equitable representation can be obtained with far fewer MPs than 338. Reducing the number substantially would of course require a constitutional amendment to eliminate the "grandfather clause," which guarantees each province at least as many MPs as it had in 1985, but with the increased efficiency Canadians might very well be amenable to the change. It would be a good time also to remove the "senatorial clause" which guarantees that each province have at least as many MPs as Senators. Over-represented provinces, PEI first among them, would complain but then they are a diminishing voice.
Short of changing the constitution, the Liberal proposal is a sound approach. Fix the number at 308 and adjust as necessary.