Earlier quoted context omitted.
> The one fifth of trips that wouldn't exist seems like a positive to society... But it does still mean more traffic.
It may not mean the traffic we actually care about. If vehicle miles increase at 3am, when no road is at capacity, there is virtually no externality or negative impact buses. If people are mainly using Uber/Lyft for those mid-late evening barhopping trips, then the same logic basically applies -- those aren't the times when roads are near capacity. It would mainly be a problem if they're using it near rush hours, whe…
On the other hand, off-peak capacity on transit is often near free. The line is built anyway, or the services have to be provided anyway, or the shifts are 8 hours anyway, so providing extra off-peak trips is often not a big strain.
If the displaced trips are done by people who usually don't take transit, it means they'll pay more expensive fares (single tickets), which could even be cost-neutral wrt to subsidies. At the same time, those trips can get drivers used to the idea of taking transit, possibly encouraging them to take more transit in the future.