The big apple wasn't built by people who think small. New York, the nation's largest city and at various times the home of the tallest buildings, best theater, most efficient subway and most loyal baseball fans -- not to mention the best, perhaps only corned beef sandwiches -- had for 14 years been planning the most expensive highway in the nation. The road, known as Westway, was to replace a portion of the old West Side Highway for a distance of 4.2 miles at a cost of $2.3 billion. Ninety percent of the financing was to come from the federal highway trust fund.

This week, after a series of adverse court decisions and a surprisingly lopsided vote in the House against funding the project, New York leaders have agreed that their cause is hopeless. Sens. Daniel Moynihan and Alphonse D'Amato, Gov. Mario Cuomo and Mayor Ed Koch are preparing to ask the federal government instead for a much more modest highway allocation and about $1.7 billion from the highway fund to be used, as the law allows, to revitalize the subway system. Rep. Ted Weiss, in whose district Westway would have been constructed, had consistently -- and uncharacteristically for a congressman -- opposed the expenditure for reasons that clearly persuaded his colleagues.

Westway, said Mr. Weiss, was not really a road, but "a real estate boondoggle posing as a highway project." Plans called for a 227-acre landfill in the Hudson River through which a tunnel was to be built. The new land itself would then have been available for commercial development. A complex of office buildings, apartments and parks was planned for this prime location, and Mr. Weiss contended that private real estate developers would be the ultimate beneficiaries of the project.

Opposition came from other quarters as well. Environmentalists worried about the impact of the project on fish in the Hudson; New Jersey officials claimed that their state would be damaged by flooding and the redirection of toxic wastes in the Hudson; advocates of mass transit believed the new highway would draw more automobiles to the city and accelerate the deterioration of the subway. Finally, House members realized that the project would take far more money than New York's share of the highway trust fund, leaving every other state with less.

New York certainly needs some kind of new highway on the West Side, and it needs federal funds for the subway too. Citizens and elected officials, many of whom are bitterly disappointed by the collapse of the ambitious Westway plan, now turn to alternatives that are, in these days of budget restraint, more realistic than the monumental dreams of 1971.