This would only work as a valid argument if the game wasn't designed to be equally about competitive infighting as it is about cooperation.
What does this have to do with anything?
If you are a Fighter mage wearing full Physical Armor against a full on Warrior, chances are that you are going to win because you'll shit on his piss poor Magical Armor and CC lock him until he dies while he won't be able to get through your own Physical Armor, especially if you can screw him over with Teleport, Fortify, so on and so forth.
The game being designed about both competitive infighting and cooperation doesn't change that fact.
If you'd have to balance everything around giving everyone an equal chance at winning in a duel, then... what would happen to support casters? Those who's only purpose is to boost other to do the dirty job for them. They'll never win a fight because they are backline buffers.
While "exponential" isn't the correct term(I suppose "multiplicative" would be), the scaling is still such that your level increases the base damages and investing in the attributes also increases the multiplier on those increases, which means that you will be significantly outpacing someone who spreads his points around.
Except you won't.
If you put 10 points into Strength, you get 50% bonus to your Strength physical damage.
If you put 5 points into Strength and 5 into Intelligence, you get 25% bonus to your Strength physical damage and 25% to your magic damage AND you can wear both Warrior and Mage armor.
So you do 125% Physical damage and 125% magical damage.
Versus
150% Physical damage and 100% magical damage.
Sounds pretty balanced to me when you actually get the benefit of wearing whatever the hell you want and cover both Physical and Magical Armor the way you want to.
