Small element close to lunacy (4)
I believe the answer is:
tiny
'small' is the definition.
('tiny' can be similar in meaning to 'small')
'element close to lunacy' is the wordplay.
'element' becomes 'tin' (tin is a kind of element**).
'close to' says to take the final letters (the close/ending of).
The last letter of 'lunacy' is 'y'.
'tin'+'y'='TINY'
(Other definitions for tiny that I've seen before include "Quite insignificant" , "pocket" , "Slight" , "Miniature" , "Little" .)