Although the title gets the gist across, clearly, this is going to run into a lot of contradictions if I don't explain the idea as it resides in my head.
Bear with me in the following analogy of a child playing with modelling clay. Suppose they are very creative and very proud. I.e; they are constantly pursuing more novelty in their creation, and do not want to destroy what they have already made.
Suppose they start by making two houses using the entirety of their clay, yet they still want to add more complicated features while preserving what they have already. The only way to do so is to proportionally scale down their models, so they have more clay to work with.
In this analogy, the clay is the total amount of fundamental building-block to work with, creativity is entropy, and the proportional scaling-down is the facet required to satisfy higher entropy. As a result the elements of the system become relatively smaller, while distances become relatively larger. To the perspective of one of the models, it does not experience itself getting smaller, but rather experiences the universe expanding and getting more complicated. The analogy isn't perfect, and my idea of assuming entropy as equivalent to intricacy may be conceptually wrong, but I hope you get the main idea.
Analogously, galaxies are not getting farther apart from an universally-external perspective. Rather, they are at a more relatively static distance, individually shrinking to satisfy the need of delegating properties of itself to increase intricacy.
This model of the universe is going to run into contradictions if we don't specify what and where exactly is being scaled down (e.g; particles, forces, physical constants, etc).
A similar question was asked in 2012. The main answer brushed the thought experiment off as an example of "Occam's razer". However, I don't think it's safe to say that a "component-shrinking universe" is a more complicated theory; as it seems to only differ interpretationally.
Could this model be a viable alternative to expansion? Is it mathematically equivalent, just interpretationally distinct?
Furthermore, would this explain redshift not as wavelengths being stretched over through expanding space, but residual unaffected 'bigger' wavelengths from an older universe whence things were less shrunk?