Your original argument was basically "a small car won't fit my personal situation". So what? In what way does your situation generalize? You're clearly atypical in family size. Other people have pointed out that it's possible to fit a supermarket shop or travel a long distance in a small car. I imagine a sizable number of Americans, sufficient for a robust market, would be adequately served by a small car.

> So if they don’t need a larger car they shouldn’t have them?

That's nowhere in what I said or in the OP. The OP did talk about pulling "policy levers" to change incentives.

> Small cars are available, even in the US, but most people aren’t interested in buying them. There are lots of reasons for that. Unless you plan to get draconian about it, people would need a reason to favor small cars.

That's basically what the OP is all about.