Why can't I move photos from my library to albums by dragging and dropping in Photos app?

Or to put it another way: an album isn't a place, it's a list: an instruction to the app to 'display this collection of images together'. So images do not get "moved" to Albums, they get added to that particular list. This means that an image can be in more than one album but use no extra disk space. Similarly in the Music app, all the tracks are in the Library and can be added to any number of playlists.

If that doesn't suit your needs you're free to use a different application hat works the way you prefer. That's consumer choice.

Photos in your Albums are not copies of the photos in your Photo Library, they are merely a link to that photo. That way you can have multiple Albums that all contain the same photo without taking up any additional storage space.

That is consistent to the way Libraries work in other apps such as Apple Music. When you add a song to a playlist, you are not creating a copy of that song or moving the song to the playlist. If you were moving the song to the Playlist, when you delete the playlist, the song would be gone.

That is how it is supposed to work and anything else would be incredibly inefficient by duplicating multiple photos and increasing the amount of storage required. You are then able to delete Albums, or Playlists for Music, and not have to worry about accidentally losing your precious data. I have many Photo Albums, and Playlists, that contain the same photo/song and thankfully it does not cost me any data. Syncing the photos to iCloud would also possibly require you to pay for additional iCloud Storage if you had the same photos in different Albums.