And there is such a game-- it's called Dungeon Runners, or Diablo II, or any other game that scales itself to match the players in it. But there are, of course, tradeoffs to such a system. If you have scalable instances (or a scalable overworld, or anything else that scales according to the people playing it), then you start to miss out on some of the development choices you can make. Many of the best bosses in the game don't work unless you have a certain number and a certain mix of characters involved, and any scalable instances would miss out on that design choice.
It's the same reason we haven't seen single-player instances yet-- because making things scalable would mean that developers would have to make everything accessible for all classes, and therefore they would lose the design that made the game so popular in the first place. If you want to play a game that scales to as many players as you have, you're welcome to play something else. But if you want to experience the content designed by the WoW programmers the way they intended, you've got to log in with what each instance requires.