fish will adapt to a new environment. eventhough they may not be given the "textbook" amount of space within their confines that doesnt mean that they will not be able to develop, mature, and live a successfull life without being plagued by disease or death
actually, fish will not 'adapt' to a space which is too small. they simply don't thrive nor live their genetically programmed lifespan.
i think it's a given that not everyone can afford nor have the space for a 'large' tank. that said, if one doesn't have the proper space for a particular fish, then don't buy that fish. there are so many fish species available ... doesn't it make more sense to purchase fish that fit your tank?
i sometimes use this analogy: if you were kept in a closet, fed twice a day and had your pee bucket emptied every week do you think you'd 'thrive'? more likely, you'd survive but you wouldn't enjoy the experience. you'd be pretty stressed, you wouldn't grow as tall as you should have and your muscles would atrophy due to lack of proper excersize. you'd likely succumb to various diseases and would not live to a 'ripe old age'. it's no different for fish, or for that matter, any form of biological life.
for some reason which has escaped me, fish seem disposable. so many folks have a "if they die, they die .. i'll go buy more .. they're cheap" kind of attitude. we wouldn't treat the pet dog this way but fish? hey, they're just --- fish. i vehemently disagree with this practice. i'm not particularly religious but i know god didn't intend for us to torture animals in our care just because we can.