Because the airlines find that works for them.

The fact is that 99% of FFP members never think to redeem an award for something that doesn't cost the minimum number of miles (about 25k domestically, about 50k to Europe), and thus the "audience" for awards of any kind (even business class) at just double these lowest-miles-cost awards does not risk a "run" on business class or first class int'l seats.

Keep in mind that miles are used to get, for the most part, "excess inventory", and excess inventory in any (service) industry is priced comletely differently than "prime" inventory. The same very "non-linear" relationship exists in many hotel rewards programs, restaurant dining programs, etc, etc, in all (service) industries where inventory typically exceeds demand and pricing is mostly "what the market will bear" rather than related to any actual costs.

Another reason is because miles awards have been "simplified", as have business and first cash tickets, but economy cash tickets are priced all over the place. Your math is based on comparing the very cheapest economy fare, and you're forgetting that it carries more restrictions than the "discount" award does. So perhaps the discount award should be compared to something more like "minimal restrictions" economy ticket costs, in which case the discrepancy between economy and business and first would not be as great as your math based on "most discounted econony" produces.