Is that true if everyone else just starts driving bigger cars? Seems like we'll just end up in a Mutually Assured Destruction scenario where everyone loses, but especially the people outside of the giant cars.

We saw this in my philosophy class 15 years ago as a classic opportunist's dilemma.

What you are describing is basically what happened though.

It still makes sense when you consider the increased internal space. You can see this in single vehicle crash tests that do not rely on a second vehicle's size.

On the balance, yes, but SUVs have their own risks, notably rollover due to the highest center of gravity.

https://en.wikipedia.org/wiki/Criticism_of_sport_utility_veh...

Not wrong, but it has been estimated that for every occupant saved by larger cars in recent years, 2.2 pedestrians have died. Not a great balance.