Just so, Jon.

To summarize my thoughts on this subject: it's all about promoting a false impression of scarcity.

Oh, yes, verily-- there are relatively few seats at HYPS. That much is true. The thing is, though, is there THAT much difference between Cornell and Princeton?? Between Stanford and... Harvey Mudd? Is there THAT much difference between, say... UVA and, I dunno, George Mason?

The truth is that the answer is "probably not."

But that isn't going to promote much of a feeding frenzy surrounding "getting into {insert name of institution here}."

So sure, scarcity is real. It also doesn't matter, because in the larger sense, it isn't real. There are PLENTY of seats at "good enough" institutions-- for students who are able enough to take advantage of them. When is the last time you heard of a high school student graduating in the top 25% of his or her class who "couldn't get in anywhere," hmm? Never.

Most of the institutions doing this aren't doing it for any kind of well-considered reason, even. They're definitely not doing it so that they can be higher QUALITY. They aren't investing in the things that would lead there, quite honestly. They only care about demand, and will do anything to drive it higher so as to improve their ranking in crazy things like USN.
Schrödinger's cat walks into a bar. And doesn't.