a. The economically motivated criminal. Hole size makes no difference as
any hole is an economic deterrent.
b. The crazy - hole size makes no difference as they are not deterred
These are two distinctions that are very rarely considered. Is a mugger out for beer money going to run from a small gun? Probably.
Is a rapist, a dope dealer, an angry pimp, a bank robber, or a workplace killer going to be deterred, especially by a mouse gun in the hands of an every day joe? Probably not.
The thing to remember is that you're not going to be drawing a weapon just because a guy has a newspaper and is planning on you on swatting your nose, you shouldn't be drawing a weapon unless you are under serious duress. Chances are, that you are going to encounter a dangerous, and very "brave" (not easily frightened) individual who may just use that as an excuse to waste you.
So, as has been discussed, going small and counting on the best case scenario to work out is foolish. Even charles bronson couldn't intimidate 3 armed and aggressive Crips with a .25. And, as has been mentioned, if deterrence fails and you have to resort to armed action, how well served will you be by this pocket pistol?
Handguns are all inadequate to the chore of absolutely, without fail, stopping an aggressor, especially in the hands of anyone less than a highly trained and practiced individual. Choosing a seriously inferior weapon when a better one is available is the wrong decision to make.
A word about deterrent. The global nuclear arsenal is the greatest weapon that mankid will ever have. Does it act as a deterrent?
What we need to do is ask osama bin laden, Kim Il Jong, or any of the other half cracked individuals on the planet if they are really, truly afraid of our nukes. They will laugh at you. They recognize that the nuke in the hand of a sane person is meaningless. Even in the world's greatest staredown, between the two nuclear superpowers, it was always touch and go as to whether someone would actually push a button and count on fear suppressing retaliation.
In my own mind, I don't really believe in deterrence. I don't think that on average, mankind has much grasp of negative consequences beyond some of the most basic levels.