That would help, but....
1. I believe Java tries to conserve memory by merging duplicate strings of class String. So you can easily have two String objects pointing to the same buffer. Edit one of them, and the runtime has to alloc a completely new buffer for it. Even if you're shrinking it.
2. If you alloc in powers of 2, you'll have beacoup wasted space, and the spectre of disk thrashing lurks in the shadows. This isn't a criticism of the basic concept, but some fine tuning is called for. Now if you increment by a fraction, say 5/4, you get a different tradeoff ratio. Less wasted memory, but more frequent allocs.
In fact, it's rumored that some Java implementations do something like this.
But there's no beating the fine control you get with your own StringBuffers. That way, the efficiency is more directly influenced by the ability of the programmer. I say use String for prototyping and for code that doesn't get exercised much, but use StringBuffer for high usage production code. Or else code it in C or C++.
