Why would one want to prevent applications from reading other applications' files?
We're talking about running desktop applications designed for an OS that isn't built around any concept of application isolation, and for which using a common filesystem is a primary mechanism of interoperability.
Because I can, and because I don't trust Windows application to be secure.
Thanks to that, I have no problem running 15 year old office software: even if I knew it was malicious, I also know there's nothing it can do without network access, without file access, and with resources constrains (so it can't even cause a denial of service, except to itself).
In the worst case, I guess it could try to erase its own files? (but it would then be restored from an image on the next run, and I would keep going)
Great. Except... WTF can you do with an office application that can't read or write files?