Why does omitting cabal-version cause the build to fail?

Question

I have a minimal example project:

Test
  Test
    Test.hs
  Test.cabal

Test.hs contains an empty module Test.Test. The contents of Test.cabal are as follows:

name: Test
version: 0.0.0
library
  build-depends: base
  exposed-modules: Test.Test

Running cabal build fails with a long, confusing error message (copied below) unless I add cabal-version: 2.2 to the cabal file. Higher than 2.2 works as well but lower versions result in a similar error. My cabal version is 3.2. Why does the build fail unless I specify a cabal version and why are versions lower than 2.2 not sufficient?

The error message that I get without specifying cabal version is as follows:

Resolving dependencies...
cabal.exe: Could not resolve dependencies:
[__0] trying: Test-0.0.0 (user goal)
[__1] next goal: Test:setup.Cabal (dependency of Test)
[__1] rejecting: Test:setup.Cabal-3.2.0.0/installed-3.2.0.0 (conflict: Test =>
Test:setup.Cabal>=0 && <1.25)
[__1] skipping: Test:setup.Cabal-3.6.3.0, Test:setup.Cabal-3.6.2.0,
Test:setup.Cabal-3.6.1.0, Test:setup.Cabal-3.6.0.0, Test:setup.Cabal-3.4.1.0,
Test:setup.Cabal-3.4.0.0, Test:setup.Cabal-3.2.1.0, Test:setup.Cabal-3.2.0.0,
Test:setup.Cabal-3.0.2.0, Test:setup.Cabal-3.0.1.0, Test:setup.Cabal-3.0.0.0,
Test:setup.Cabal-2.4.1.0, Test:setup.Cabal-2.4.0.1, Test:setup.Cabal-2.4.0.0,
Test:setup.Cabal-2.2.0.1, Test:setup.Cabal-2.2.0.0, Test:setup.Cabal-2.0.1.1,
Test:setup.Cabal-2.0.1.0, Test:setup.Cabal-2.0.0.2 (has the same
characteristics that caused the previous version to fail: excluded by
constraint '>=0 && <1.25' from 'Test')
[__1] rejecting: Test:setup.Cabal-1.24.2.0, Test:setup.Cabal-1.24.0.0,
Test:setup.Cabal-1.22.8.0, Test:setup.Cabal-1.22.7.0,
Test:setup.Cabal-1.22.6.0, Test:setup.Cabal-1.22.5.0,
Test:setup.Cabal-1.22.4.0, Test:setup.Cabal-1.22.3.0,
Test:setup.Cabal-1.22.2.0, Test:setup.Cabal-1.22.1.1,
Test:setup.Cabal-1.22.1.0, Test:setup.Cabal-1.22.0.0,
Test:setup.Cabal-1.20.0.4, Test:setup.Cabal-1.20.0.3,
Test:setup.Cabal-1.20.0.2, Test:setup.Cabal-1.20.0.1,
Test:setup.Cabal-1.20.0.0, Test:setup.Cabal-1.18.1.7,
Test:setup.Cabal-1.18.1.6, Test:setup.Cabal-1.18.1.5,
Test:setup.Cabal-1.18.1.4, Test:setup.Cabal-1.18.1.3,
Test:setup.Cabal-1.18.1.2, Test:setup.Cabal-1.18.1.1, Test:setup.Cabal-1.18.1,
Test:setup.Cabal-1.18.0, Test:setup.Cabal-1.16.0.3, Test:setup.Cabal-1.16.0.2,
Test:setup.Cabal-1.16.0.1, Test:setup.Cabal-1.16.0, Test:setup.Cabal-1.14.0,
Test:setup.Cabal-1.12.0, Test:setup.Cabal-1.10.2.0, Test:setup.Cabal-1.10.1.0,
Test:setup.Cabal-1.10.0.0, Test:setup.Cabal-1.8.0.6, Test:setup.Cabal-1.8.0.4,
Test:setup.Cabal-1.8.0.2, Test:setup.Cabal-1.6.0.3, Test:setup.Cabal-1.6.0.2,
Test:setup.Cabal-1.6.0.1, Test:setup.Cabal-1.4.0.2, Test:setup.Cabal-1.4.0.1,
Test:setup.Cabal-1.4.0.0, Test:setup.Cabal-1.2.4.0, Test:setup.Cabal-1.2.3.0,
Test:setup.Cabal-1.2.2.0, Test:setup.Cabal-1.2.1, Test:setup.Cabal-1.1.6,
Test:setup.Cabal-1.24.1.0 (constraint from minimum version of Cabal used by
Setup.hs requires >=3.2)
[__1] fail (backjumping, conflict set: Test, Test:setup.Cabal)
After searching the rest of the dependency tree exhaustively, these were the
goals I've had most trouble fulfilling: Test:setup.Cabal, Test