Default Nexus 5 screen size, real estate, and battery

The Nexus 5 looks and runs great, but everything's so big I feel like I'm using a toy phone. The PPI really would have made more sense on a 4.5/4.7" screen (or even a 4" screen for us small-handed), and for a budget phone I would have expected 720p (pixels) resolution. This would use less battery which would require less battery so it could have kept about the same thinness (but I'm perfectly happy adding thickness and heft for more battery).

I don't understand Google's thinking behind this phone. It's a great-quality phone, but it's just too big for the things on the screen. They look great about 10 inches away but normal distance from my face, about 7", everything just looks oversized. I feel like at this screen size they could have added another column or row to the launcher and had them match up to the bottom dock shortcuts.

I know how to change the PPI, but I would just more like to know what made Google decide to go with such huge icons and fonts on such a large screen with full HD (1080p) resolution and not add any more real estate to things like Chrome or Settings or anything.