Pretending that soft skills don't matter, or aren't reflected well by extracurriculars, is also a problem. I don't expect that those soft skills can ever be effectively measured with standardized testing of any sort-- easy or difficult, for that matter. But they do matter-- both in higher ed, and beyond it.

EC's are a convenient means of filtering those students who likely possess some measure of desirability on that front-- who are well-rounded and socially mature enough to be good members of a learning community (inherently a social activity), and also to withstand the pressures inherent in an elite learning environment with positive coping methods.

The problem is that extracurriculars can be gamed so darned effectively with funding and parental assistance.
Schrödinger's cat walks into a bar. And doesn't.