People prefer how it looks and it's also more convenient to have a square room and no irregular protrusions stopping you pushing furniture up against the wall.
In the UK it used to be common for pipework to be exposed and painted. Electrical conduit is pretty common in "industrial" places like garages but the number of sockets people expect now would mean you'd barely have a flat wall anywhere.
The current preference is definitely for clean looking, square rooms. When pipes don't fit in the walls themselves, like soil pipes or around boilers, they are boxed in or hidden away in a cupboard.
Generally things that are illegal are illegal because enough people have maimed or killed themselves with it in ways that are not “common sense”. For example, you can’t simply have electrical wire stapled to the bottom of the joists in the basement because people might try to hang clothes off of them.
It's legal and done quite often in industrial installations - look around the next time the lights are up at your favorite restaurant, for example.
It is more expensive, by more than you'd think, and so it's rarely done.
It also allows all of the trades save the drywaller/painter to be rough and tumble with what they're doing; it doesn't have to look nice behind the walls.
Conduit all the things and paint to match?