I'll mostly outsource the criticism of a NYTimes article on how small vehicles do worse off against bigger ones in accidents to Deltoid. Like Tim says, smaller cars are providing a social benefit of increased safety for bigger ones, much like they generally do with air pollution issues.
There's an additional issue too - a small vehicle might end up missing having an accident entirely, precisely because it's smaller. A side-swipe or clipping accident that would send one or both vehicles rolling turns into a near-miss for a vehicle that's six inches narrower or two feet shorter. I'll admit that a smaller vehicle is harder to see, but a big one is harder to miss when you're at the edge of having an accident.
More smaller vehicles not only mean less kinetic energy poured into accidents, it could mean fewer accidents to begin with.