The problem is that you can't use public transport for cargo, for disabled people, for luxury rides, etc - there are many more use cases. Another problem is time - the bigger area and the more people your bus line has to serve, the less efficient it is for your customers.
There are better ideas than to minimize space (comfort AND usability) per person. E.g. optimizing your route in a way that you go from point A to point B as directly as possible, utilizing buses and shuttles on the way, taking people that need it. Bus lines are just like this, but fixed to specific pickup points, which would definitely remain existing, but the traffic around it would get optimized as well.
Why? Because with growing population, there are more and more people that need to go individually because of time constraints, comfort requirementa, disability or cargo. My solution supports your approach, just extends it to all vehicles on the road.