I am familiar with most of the rules about same day changes - fees typically of $50-75 to get a confirmed seat and, with few exceptions, no free standbys. What I don't understand is this -

Example -
Airline has a 4 pm departure that is completely full, possibly even overbooked. Airline also has 3 pm flight with about 20 seats available.

Airlines will not allow anyone on the 4 pm flight to switch to the 3pm flight for free.

Would it not be in the best interest of the airline to allow such a switch? It makes people happy who want to go on the earlier flight and reduces or eliminates the possibility of denied boarding and denied boarding compensation on the later flight.