To some extent they do, but at some point real-world physics outstrips even our best graphics engines and processors. Depending on the type of game, there are different issues to contend with.
Take a racing game. It seems pretty straightforward. Take the stats for a given car (0-60 acceleration, top speed, 100-0 deceleration, drag, etc) and put those numbers into simple physics equations to describe behavior. That might even get you an okay simulation. But when you start pushing for absolute realism, you have to account for everything. How hot is the pavement? How old is the pavement? What are the weather conditions like? How humid is it? What's the dewpoint? What kind of lighting conditions are there? Wind speed and direction is a factor. The materials the car is made of matter. What kind of brake pads do you have? How far into the race are you and how hot are they and how much does that affect their performance? What is the auto-body made of? How does the suspension handle different terrain and transitions between them? How does the engine perform under stress with different types of motor oil?
Just handling light in a game world is incredibly complex. Light doesn't just bounce once and stop, it reflects and is absorbed by multiple surfaces before it's done. So how do you handle driving under trees when you're modeling every leaf with real-world physics equations and you have to determine where the light will pass and where it won't, plus what color, tone, and brightness will hit the road surface and the myriad car surfaces.
If you get into games like call of duty or the like, then you have to start dealing with human motion, skin which can be all kinds of colors, have varying amounts of hair, sweat, blood, and dirt, and moves in ways we have trouble modeling with simple physics equations.
Now imagine having to do all of these calculations simultaneously, repeatedly, and rapidly to handle the constantly changing conditions. It's enough to overload even the best consoles and gaming PCs out there. So game designers use other equations to model some patterns and movements to simplify what the system has to handle. As our computing power increases, our ability to match real-world physics increases, but we still have a ways to go.
So TL;DR: There are too many details to calculate real-world physics constantly for every aspect of a game, but we are getting closer.