Also, weapon damage scales with your skill level. If a level 1 got his hands on a daedric shortsword, he'd only be doing 3x the damage he would have done with the iron shortsword you get in the first 3 minutes. Let's imagine that a jarl has a heavily guarded treasure room. We're talking traps, static and patrolling guards, multiple master level locks...hell, throw in a dwemer machine too! In that room is stacks of gold and ebony ingots, chests filled with gems and glass, ebony, and daedric armor/weapons. Your character manages the nearly inconceivable feat of robbing this room at an early level...and is rewarded with only a 3x damage output.
That seems balanced to me. With the way the game is set up, damage grows exponentially, rather than linearly. You level by getting your skills up, and you get better weapons by getting your level up.
Here's what ends up happening to a lot of players:
1) They go dungeon crawling with their low level gear
2) They run into a rough patch because quests got harder or their perks aren't properly balanced or they're not taking advantage of their character's full potential
3) They can't find better gear anywhere, so they turn to smithing
4) 3 hours later they're in a full suit of dragon gear with daedric weapons
5) 5 hours later they reroll a mage (then rinse and repeat with enchanting instead of smithing)
I find very little motivation to do most of the quests in this game. The compensation is just crap. Some steel dagger with a 5 dmg cold enchant? WOW!!! 250 gold?! omg! When you do something spectacular, especially for someone rich, you should be compensated accordingly. Many quests are obviously worth doing just for the thrill of experiencing the quest, but I can't help feel like i'm getting screwed over afterward.