"I've always wondered why we pave our streets to begin with."

Dramatic reduction in particulate air pollution.

There have been programs to reduce air pollution in towns along the US - Mexico border. Folks on the US side paid to have roads paved in Mexico so it would reduce pollution--it was cheaper than taking incremental steps on the US side.

I've lived on dirt roads. At this point you only really find them in very rural areas because of their disadvantages.

1) Dirt roads can become almost impassable in bad weather. Everything turns to mud so it's very easy to get stuck or damage your car

2) Dirt roads require a fair amount of maintenance under moderate use. Roads can wash out, have too many rocks, can become lopsided or have gauges in them from car traffic.

3) Its way to damage your car. If you go too fast you can easily blow your oil pan. Dust of course gets into everywhere including the engine.

4) Low speeds. Your max speed is around 20-40 mph in good weather depending on the curves. Bad weather you can easily be going 5 mph. When getting to the town center takes an hour takes an hour, it becomes beneficial to leave roads just because of the increased store traffic.

5) Your vehicle gets incredibly dirty. Those wash me memes are clean in comparison

For one thing, you can safely go a lot faster on asphalt than on dirt while still being able to round corners and come to a stop.

If you draw a distinction between streets (~access) and roads (~transport) that isn't really a good reason. People around here drive too fast on streets as it is.

I grew up in a rural area with its fair share of dirt/gravel roads.

Vehicles definitely see a lot more wear from driving on dirt roads (beyond the superficial constant dust covering). I expect that the cost of pavement is less than the cost of additional maintenance for all the road's users. (This also explains why it makes sense to leave some dirt roads in very rural areas.)

This depends on amount of traffic, and conditions.

I live in Finland where the population decline in some rural areas has lead to it being economical to remove paving from roads. With not much traffic - but the road still being essential for local economy, e.g. timber transport - it's cheaper to maintain a dirt road than a paving.

Part of this is due to local climate - in the winter the frost goes a meter deep in the ground, so maintaining paving means an occasional re-build every few decades, putting under the tarmac a deep layer of material that passes water through quickly. With dirt roads, you don't need to, you just level it, which is quick and cheap.

I live on an unpaved street surrounded by paved streets. I think it means we have more foot traffic and less car traffic.

Portland Oregon has a fun policy to encourage neighbors to turn unpaved roads into linear parks. https://www.portlandoregon.gov/transportation/63612

I'm sure there are some road users this wouldn't work for, but check out permeable interlocking pavers. I encountered some country roads in Germany that were paved with these for many kilometers. It was a beautiful and pleasant place to ride.

These wear pretty quickly upon use.

It sounds like you're suggesting there could be gaps in the middle of the lane, so only the area the tyre uses is paved, but that's surely missing the bigger picture:

80' is 7 or 8 lanes for highway traffic! Why is the road so wide?