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Your couch looks different in early morning sunlight, mid-afternoon sunlight, and late-night halogen illumination. That's not because someone sneaks in and reupholsters it when you're not looking. It's because different lighting can make the same object appear different.
My couch, yes - but this is a game with artificial sunlight and moonlight.
Real-world rules do not apply - it all has to be coded from scratch. There are "step-up assist" programs that can be built into or added to the game engine to handle some of the more complicated and time consuming tasks [HAVOK Physics comes to mind - it is a pre-coded physics simulator], so the programmers have more time to focus on other things.
Everything Polyphony Digital does is all in-house. They create their own software and dynamic lighting is very difficult and processor heavy to implement in any game. It's not as simple as just passing a light map in real-time over a textured object - you have to change the object and texture's color to match the time of day and the relevant position of the shadow as well.
It's very difficult to do properly.
I was surprised that GTAIV had dynamic lighting with shadows! 👍