Some power systems do actually put a fuse in the extension cord… I think it’s the UK that does this. Basically every power system other than the US uses different (safer) plug designs that solve the arcing problem.

In practice daisy chaining rarely causes a serious problem and it makes things more expensive so it never really became a thing that was legislated or common within the US. Similar to how the plug designs themselves rarely cause a problem so it hasn’t made sense to actually change them.