Are Keyword Rich Domains Good?

If there are any flaws in Google's algorithm it might be that they favor keyword rich domains and have for some time. If your running words domain is a match to the search term there is a high probability that you will find your domain name near to or at the top of the SERPS (search engine results pages). One can only assume that Google favors keyword rich domains because they are suppose to state what they do. So if my domain name is lampsandchandeliers.com then Google assumes that I sell lamps and chandeliers. Notice that the domain name is not hyphenated, this is a known spam practice and is a red flag to the search engines.

I have been curious for some time now why Google hasn’t adjusted their algorithm so this isn’t so easy to manipulate. Google any answers?