This is exactly right, the massive benefits of sticking a bunch of people with very abstruse interests close together is basically impossible to replicate. Labs, where people interact with each other daily and every week, where there's in-person exchange and chance encounters, is pretty difficult to simulate even with chat like IRC or forums or social media.
I browse science-focused social media and forums all the time. But the time spent doing that is never as good as going to a seminar presentation from somebody I've never seen before on a topic I never would have thought to investigate.
The world becomes poorer when these aggregation points are disaggregated. Reducing MIT's aggregation does not increase aggregation effects elsewhere.
I don't care if this happens at MIT in the US, or somewhere in Paris. Actually, I take that back, if the US continues its current authoritarian anti-open immigration policy, then I do care intensely that Paris or England or Berlin or wherever should become the center of academic innovation. Just as China's authoritarian closed policies make China unsuitable to be the academic center, Trump's authoritarian closed policies make MIT unsuitable. However Trump is weak, losing power, and in two years we can begin prosecuting all the people in his administration for their lawlessness, cruelty, and inhumanity. The US will rebuild, but it will take a while if we want to rebuild according to our constitution and laws.
