Known Space has hobbits. Doctor Shin Wei Chung was possibly a visionary (or possibly a lunatic), and during the late 21st century when global warming became a massive issue he decided the only way humanity was going to survive was by using less resources, and that meant less humans, or at least less biomass of humans. So why not have the same number of people, but each individual smaller, more efficent? His agricultural research station in an out of the way corner of Tibet had successfully produced miniature cattle and he now set about sampling all the known human mutations that reduced size and worked on the genome around them to mitigate some of their less healthy consequences.
His first generation of small people were sent out into the world with false IDs to study in the best universities and they soon took over the project themselves. After three generations the result was a population averaging 3 foot six inches tall, well proportioned and agile, robust with no serious long term health problems, breeding true with no occasional big people, just humans, but little; Homo sapiens minimus.
However the worst of global warming was past, fusion power and mass interstellar colonisation had seen to that, and they were not going to inherit the Earth from their bigger (and in their opinion more short sighted and wasteful) brothers.
They existence of the project had gradually become known over its first century, and the Chinese authorities who had (unwittingly at first) funded it kept doing so, hoping to use the hobbits as cheap starship crew – you could after all fit twice as many into a starship, cutting life support costs considerably – and put the project under military control. People inevitably didn't quite take them seriously, a source of great annoyance, and when tourists took to coming to gawp at them and the military talked about abandoning the project and finding them jobs in Tolkein theme parks, they got pretty angry. In the end they staged a revolution, throwing out their military trainers and demonstrating their complete grasp of guerilla tactics in the wilds of the Himalayas. They ended up in Nepal and Bhutan, and eventually got enough money together to fund a colony ship. They now live happily in the mountain valleys of Tau Ceti Prime, and can be met anywhere in Known Space. They still don't like being called 'hobbits', or 'halflings', or any other literary or mythological name for little people. They aren't going to start a bar fight over it (well not often anyway), they know they would probably lose, but they are certainly verbally scathing about people idiotic enough to make an issue out of their height.
Hobbits can be any profession. They only need two tons of life support as starship crew, not four, and at a pinch four can fit in a standard stateroom. They have few entirely hobbit crew starships, and these have smaller bridges unusable by anyone over four feet tall and tiny corridors that big people have to creep down.
Hobbit military forces are not to be messed with. Just because you are short doesn't mean you can't drive a tank or fly a grav-bomber, and they are well trained in infiltration and the use of laser carbines. Weaponry has to be specially made to their size though, even a normal size pistol is unwieldy for them, and this is not available anywhere except their homeworld unless specially made.
- Fricking aliens have landed! After two centuries of looking the human race has finally met the Little Green Men! Or is it a bunch of Hobbits having a laugh with big yokels on a backwater planet? Or doing something else secret, landing their starship way out in the desert?
- Hobbit mercenaries have been deployed in an ongoing brushfire war. Their opponents say they are really child soldiers and all kinds of treaties have been violated. Go and check it out for the UN and try not to get a laser beam between the eyes.
- A starport city has a problem. Big people are accusing recently arrived hobbit immigrants of taking their jobs and things are getting ugly. A hobbit undergound has grown up, the little bastards are using the ventilation ducts to get all over the domed colony and firebomb heightist bigots.
- Hobbit punks have a new sport, dog jousting. You get a big dog and ride it into an arena to fight, bloody dangerous but good fun. They need more dogs though, and they are banned in the hobbit state, can you help smuggle in some rottwielers please?
- A hobbit couple are seeking their wayward son, who ran way to space many years back. They fear he may have committed the ultimate betrayal and become a growth hormone addict, he might not be easy to find.
- The main hobbit religion is Buddhism, their culture developed in Tibet after all, and one sect have concluded that all big people are reborn as smaller ones, and that there is a direct link between reduced height and spiritual development, the shorter you are the more holy you are. A group of hobbit monks looking for the latest incarnation of the Mini Lama have found that he is to be born on planet Simba, mainly inhabited by Masai, and feel they might need bodyguards and a trained diplomat to help look for him.