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Thanks for the reply. Yeah, the idea is not exactly to change people's behavior (I'm agnostic about people's preferences– they may behave essentially the same) but rather to simply internalize the externalities. (I agree with your point in the blog post that cars have many positive externalities, too, and these are important.)

The (very idealized!) thought about national security policy is that it partly represents a form of "insurance" against oil supply shock, so that big reductions in oil consumption ought to allow reductions in the amount of insurance consumed. Now, there are also plenty of other considerations that drive national security policy, like humanitarian concerns, or non-economic concerns about people dying. But there is no doubt in my mind that economic security is one driver of national security policy.

To take an extreme case, if no one bought Middle Eastern oil, I think the region would have a strategic significance more like South America or Africa — certainly still important to us, but not something we'd be nearly as likely to go to war over. (This counterfactual is admittedly very difficult to sketch out with any certainty– lack of oil money would change the entire game in the Middle East. Nevertheless, my guess involves less money on security.)

Now in reality, we cannot achieve this counterfactual: for example, we cannot control e.g. China's energy policy– they may consume lots of oil regardless of what we do. So because we are connected to China and other countries, we are still vulnerable to ripple effects of oil shocks even if we drastically reduce our own oil consumption. But the main point is, there is an in-principle-measurable relationship between national security expenditures and our degree of economic dependence on failed, unstable, or hostile states. I'll leave it to the experts how much of an externality that is, but it should be internalized.

(FWIW, I hadn't read your blog post before you linked it.)

Even if Congress passes a law that said that no car could be sold unless it got at least 40mpg (so everyone is forced to drive around in tiny aluminum cars), it's not clear to me how this would change our policy in the Middle East.