Recently my favorite social wrote a post about a tank he kicked from his guild. Boring. But he did mention bag space in passing. Something about deleting old level 60/70 stuff.
I assume he meant old tier sets and trinkets and that sort of thing. The stuff which has no market value and adds nothing to character effectiveness. He deemed it a mere luxury, which when talking in the context of a game brings up strange arguments like what is a luxury within a luxury and what is a necessity within a luxury. I consider these a set cost; that being the gold I spent on bags for my bank. They carry a similar worth to me, since I did buy the bags, worth derived from some sort of irrational emotion such as nostalgia or desire to show off.
But while we're on the subject of old stuff: It's not all worthless. The trade mats can be surprisingly expensive. Cloth individually is cheap, but if you happen to stumble across excess while leveling alts, it can be sold for a decent bit of gold. Certainly more than bandages. Ores and herbs are even more valuable, due to lack of people farming in the area. If you do plan to farm, try hellfire; it has a mix of early BC and late vanilla herbs. There are advantages to splitting between markets: you're less vulnerable to fluctuations in one or the other.
But let's get to bag space itself.
Bag space is one of the most underrated gold losses ever. Lack of bag space. When I farmed old world instances, I would run with 30-40 free slots. Sometimes more. I think I peaked at over 50 by mailing off consumables and reagents to an alt to return when I was checking the AH anyway. This had many advantages.
I could spam loot corpses without regard for which items were marginally more valuable. Sure the 50s trash isn't worth much, but if the marginal time increase is only the second to right-click the corpse and later to spam vendor, it's worth it.
The less noticeable gain is in time picking what to loot. I no longer have to destroy less valuable items to free up space. While it's easy to know that fish oil is worthless and BoE blues are valuable; it is trickier to tell between different armor. The time to figure it out can be worth less than the gold gained from the marginally better vendoring. Then there's the fact that you cannot spam loot and if mobs are tightly packed, you may even miss loot due to overlap with the mobs with crap on them.
There is the noticeable increase in travel time. How long does it take to get to the vendor? How many more times are you doing that due to full bags? Dependinn on where you go, a trip could add another 10 minutes. This isn't even 10 minutes break during a raid when arguably you're not farming anyway and the break is needed to recover and press on. This is 10 minutes of farming time, lost, wasted. Even worse, you'll be passing by herbs and ores, their minimap blips taunting you.
Bags have a cost. But it's a cost one time and then you can make that much more gold, save that much more time, be annoyed that much less. Your needs may vary. If you carry less gear, you don't need to get the biggest bags. At that point you'll be spending thousands of gold for a smaller percent gain in bag space, and since the higher slots tend to be filled with the least valuable drops, you're hitting diminishing returns. If you don't do much looting at all, then you're probably one of those idiots in heroics who speed-runs, saves five minutes, and doesn't loot 50g of gold, cloth, and greys. Or you're a bank alt and think, "why would I need space?" To store stuff! If the market is low, hang on to goods and wait for it to go up. Don't run out of space and get stuck either mailing items away and having to go back to get them, or sell them early just for space.
The biggest time-savings comes when leveling. You start with 16 slots and will fill them up fast, possibly just from quest items. For 100-200g you can get a few 20 slot bags and suddenly space is irrelevant. Go out questing for the day and hit a vendor once, while never having to pause to sort out what to drop to pick up your next quest. Especially get big bags by the time you hit Outland. When vendor trash is 1g+ and cloth is a desired commodity, spending 20g to gain 4 bag slots (or more) quickly makes sense.