Hardware is used way more efficiently in the data center, and any sort of deficit is best resolved in a centralized system due to more efficient resource allocation. The same setup could be used like 2 hours a day for your personal needs, or 24 hours a day to serve many people.

Only for a rather narrow definition of efficiency, though. For raw compute power, yes, but you'd also be adding a whole bunch of overhead from all the network traffic and routing that would be necessary for that sort of thing to work in the first place.

If people used their desktops like in the old days where you'd connect to a mainframe or master computer, you'd end up needing computing hardware on both ends anyway, since the user side would need to be enough to be able to connect and send all the interactions to the master computer. At that point, you could just buff up the client computer, and do all that in the user's home.

There's also an argument that some of the basic problems would still apply anyway. A data centre does not fully utilise 100% of its capacity. There'd always be some reserve to have failover if a server dies, or there's a sudden spike in load, like with a home machine.