They eliminate all visual distractions, provide privacy, block some noise, prevent others from talking to you directly, and force others to move discussions to a more appropriate place. And they have an advantage over a private office - others don't knock on your door to see if you're available.

>You can surround each employee

Refers to cubicles which in my experience DID solve a lot of problems. People talk less when they don't see other people around them.

It might not solve all problems, but wouldn't you expect it to at least help dampen ambient noise from conversations, and visual distractions as well?