You might be surprised to learn, but I did some math yesterday and it turns out the inertia of a wheel actually goes down as the aspect ratio (and thus overall diameter) goes up, because it spins more slowly. So, in effect, a 165/80r14 tire is "lighter", inertially speaking, than a 165/40r14.
Going more narrow is always a win, but don't compromise safety.
There's also gearing to consider. I know a Prius has "infinite" ratios, but going up or down in size may have unintended consequences.
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