I just wanted to chime in on this - this bit is true under mixed human-AI conditions but not under all-AI conditions. A fleet of strictly self-driving cars could (upon networking and confirming that they are not in the presence of a human driver) drive within an inch of each other.
Except that only works if you run them through tunnels with limited access points. In a large country, there is no way to be absolutely certain about all traffic conditions and/or obstructions. In your one inch model, one deer causes how many cars to crash? Dozens, more? Maybe better on average, maybe not. I've seen mattresses and furniture fall off a car, tires explode (and even once a RIM come apart), trees fall on a road, plenty of animals, children, sporting equipment enter a road way.
Safety margins will never be able to reduce as far as you say, even if you could perfectly avoid any risk of surprise obstruction, even trains aren't perfect on that front, because you always have the possibility of equipment failure.
If it became the law, for example, to only have AI-drivers (for safety reasons), it would permit narrower lanes, vehicle-managed stoplights, and other advantages.
Narrow lanes, maybe, but again that increases the risks if oncoming traffic deals with an unanticipated event. Could already have GPS triggered stop lights if they really wanted to add/seriously upgrade computer technology at every stop light (and the time for repair and "connection" issues).
However there are elements to the road engineering which are 'functionally' poor even though in theory they shouldn't be. For instance if a highway is build around a natural obstruction, such as a hill or parts of the city that were there previously, the curve of the road will cause people to slow down. It shouldn't! But it will.
Why shouldn't it? Basic math says that an object going around a curve will have a tendency to go off the curve. On high speed roads we can often fight that with banking (but not always). We're pretty much limited to making sure our velocity stays below what the friction of our tires can handle. If anything self driving cars would have a much higher gradient as there would be no reason to slow them from the safe maximum, which will be substantially higher to a straight away.
There is literally no reason in such cases for drivers to apply the brakes, but they will do so anyhow because doing anything other than driving in a straight line scares them, I guess.
Or because if they go as fast around the curve as they do on the straight, they literally fishtail/spin out, or push into the wall/off the road?
Far worse than a curve in the road is an incline of any kind. If the road inclines more than a trivial amount it will automatically create a traffic jam due to people failing to maintain speed, or even braking as a result of losing sight of the road in the distance.
Losing sight over the top of a hill should cause a slow down. I had a guy that tried to illegally pass me on an uphill almost plow headfirst into a car that came over the other side that he couldn't see (then he did fish tail and almost hit my back end when he desperately braked and cut hard to avoid the contact). Even a self drive car wouldn't be expected to see the other side of a hill with an obstructed LOS (and no manufacturer should ever be allowed to let a car rely on external sensors as the sole source of info with obstructed on board sensors).
No one's mentioned some "reasonable" concerns. What happens when a car gets hacked? Stolen car drives itself away, kidnapped by getting in your own vehicle, murdered when you car takes a turn off a cliff. Heck what if it just malfunctions, I've never had a single piece of computing technology that has worked without flaw every time, let alone over the lifespan of your average car. Now add in defects and faults in every piece of interacting technology. What happens when both sides of the green light turn on? What happens when a car's network connection is glitch? They can't even get satellite radio to work in some areas of the country (urban and remote), location services fall off the grid all the time, mapping apps still run you miles from the destination on occasion. Given that any criminal would be an idiot to get in a vehicle that the police can reroute to jail, you can expect "broken" cars to show up as well.