People forget that while having a meritocracy is best for society, society doesn't make decisions, individuals do. And those individuals make decisions for their own benefit, not that of society. Colleges strike a balance by having some fraction be meritocracy, but going all in would be fatal.

Networks of wealth and power will start to congregate elsewhere and if necessary sabotage the place which now hostile to their interests (which includes that of their offspring).

There are implications for US soft power.

Would the institution carry the same prestige if it was purely meritocratic?

If NO --> Would it be a magnet for overseas talent? Would Xi's daughter want to go to it?

One can recognize the significant societal downsides while also recognizing the picture isn't very simple.