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Here's a question for you. If suburbs are "the least optimal configuration", then why did urban sprawl occur in the first place? Why did so many people leave the cities and sought bigger homes on wider lots?
Modern urbanism is very opposed to urban sprawl because of those and many other reasons. Transport is just one aspect of it.
I'm not sure that higher pollution is innate in lower densities, or whether that is due to the specific way our suburbs are designed today, and the technologies (such as ICE for transportation) that we use to enable them. It feels like an engineering problem.
And sure, putting everyone into a giant anthill might make it cheaper to contain and dispose of all the generated pollution. But then we should be honest and admit that it's about cost, not about what's best.
Small businesses - I don't think there's any innate value to them, in a sense that we need as many as we need to serve our needs, but there's no "right" for any particular small business to be viable in a world with changing conditions. If suburbs can sustain fewer small businesses, so be it.
Segregation is an orthogonal issue. I think you meant stuff like "white flight", but it is a symptom rather than a cause. If you prevent people from moving away, it will not resolve the tensions that make them desire to move - indeed, it may well exacerbate them.
What you refer to as "modern urbanism" sounds like an ideology that insists that it's the right solution for everyone, and those who disagree should be forced into it for their own good. I think that different people have different preferences in this aspect, as they do in most others, and that any approach should, ideally, try to respect those preferences, rather than ignoring them, or pretending that they are irrelevant.
The alternate future would have seen everyone living in dense urban areas paying most of their wages as rent to the descendants of gilded age land owners.
edit: spelling
Which is what is happening now anyway. The suburban sprawl merely delayed it by a few decades (okay, maybe half a century, to be generous), but all the underlying issues with it are still there.
Because humans are irrational.
Gentler answer: Because of a variety of social, political, and economic pressures. For example, quick list because I really shouldn’t be spending time on this:
* Social: Running away from black people.
* Political: Spreading out the population in case of nuclear war. Accommodating population growth without the headache of having to tear down any existing building. Giving the white flight voting bloc the housing that they think they deserve.
* Economic: A fad in having housing physically separated from jobs and other commercial activities, like the current ridiculous fad of flat UI design in software. Objectively worse, but that’s what you get paid to build and favorable financing to buy.
What I care about is that suburbs are not sustainable. The climate change crisis is acute now, and I look at the per capita use of energy, water, and infrastructure (how many miles of roads per capita, how many miles of driving per capita, how many miles of water pipes per capita, how much water usage per capita), and on no measure are suburbs better than dense cities. Take away debt financing for the infrastructure, which eventually does stop working, and I don’t think most suburbs would physically survive.
One other point I wanted to address. One negative side of sprawl is how it affects natural environments - but, again, does it really have to, or do we do it just because it's the easiest and cheapest way to implement it? It feels like living less densely could actually be beneficial for the environment if done right, compared to the cities. Consider: a metropolis will always carve a chunk out of nature and replace it with a dense grid of roads around high rises, completely ruining the ecological system in the affected area - heck, our cities even have their own microclimates now, because of how much heat we pump out at once in a single place.
On the other hand, a single residence does not have a significant impact; and if you space them out sufficiently, you can preserve the original environment in that space between. Infrastructure is trickier and more invasive, but we've seen some trends towards more localization recently (e.g. with residential solar, composting etc).
Who knows, perhaps we can actually make this description from "The Diamond Age" a reality?
"The prevailing architecture here, among those who had not adopted neo-Victorian precepts, was distinctly subterranean; as if these people were somehow ashamed of their own humanity and could not bear to fell even a handful of the immense Douglas firs that marched monotonously up the tumbling slopes toward the frozen, sodden ridge of the Cascades. Even when it was half buried, a house wasn't even a proper house; it was an association of modules, scattered about here and there and connected by breezeways or tunnels."
If you moved cattle or poultry around like we move people, you'd get fined and put out of business. Deservedly so, because of the risk of spreading disease and wiping out whole crops of valuable animals. But people, not so important I guess.
