I have run across the argument that the Imperial Chinese practice of selecting officials based on tests of Confucian classics was a factor that limited China's ability to innovate and keep up with the West. It's a tempting argument, and the more I think about it the more I sympathize, but first we have to explore one significant objection to the argument: Reading Hofstadter makes it clear that the educational systems of all Western powers in the 17th, 18th, and 19th centuries emphasized classical studies for their elites. I don't know that reading Homer and Plato is any better or worse for one's character and judgment than reading Confucius. I'll grant that the Western canon taught to elites seems to have had greater diversity of sources than the Chinese canon, but I don't think that the choice of texts was the limiting factor. Rather, I think it may be that (ironically) the Western system may have put less pressure on elites. Let me explain.
Advanced schooling was not terribly commonplace in Western countries prior to the 20th century. Anybody who got an advanced education was probably from a pretty privileged background. The people teaching in the high schools, boarding schools, universities, and whatnot might be stressing mastery of the classical liberal arts, but the kids in those schools knew that they had a good shot at a decent future just based on their backgrounds. For most of them, academic excellence was not necessary; getting by was enough. That's not to say that they all drank and partied their way through boarding school--many did, but not all. There were still sports and clubs and other pursuits befitting a young gentleman of the right background. A person who did a decent job in class and also earned respect as a leader on the sporting field and in his clubs might be recognized as a young gentleman of the right character and be recruited into some fast track in public service or business. It might not be like today's career fairs, but if he attracted the right notice it would serve his future well.
The key thing is that he was in an environment where he stood out for going above the minimum, because he and the people around him all felt some baseline of security. Within the context of their society and upbringing, they already had good reason to feel fairly secure. Those who excelled did so because of their character, not because it was their only shot.
Contrast that with today's kids seeking admission to elite colleges. I'd be the first to say that anybody who can seriously even contemplate an elite college will probably be OK if "all" that they get is their "safety school." However, they don't feel that way! They feel like they need to push farther and farther. They aren't on two athletic teams AND in orchestra AND in a community service club AND doing a special science club AND getting A's AND taking AP classes in five different fields because they are well-rounded and simply love all of those things. OK, a few of them are. However, the vast majority know that there's a game to play, and so they play it. Some will become deeply humanitarian as a result of all of that service, and be humbled by all of the privilege that they enjoy. Some will become arrogant and narcissistic because they feel that their giant resumes prove that they are so great. Most will wind up somewhere in between and just keep pushing on in life. But the key thing is that people observing them in that moment can't know who will become a humanitarian and who will become a narcissist! The competition obscures character. You never know who is passionate and who is just doing what they need to do.
There's a lot to be said for taking people outside of their comfort zones, but there's also a lot to be said for observing people in their comfort zones. Anybody who has ever taught pre-meds (or been a college student taking freshman chemistry alongside pre-meds...) knows that pre-meds are all the exact same ultra-competitive little shits (sadly). Anybody who has been to more than one doctor knows that doctors vary widely in personality, approach, and skill. Before they get into med school they are all the same because they have to be. Once they get into med school, they know that their worst case is a low-prestige residency in primary care...which will still yield them a comfortable income! Some will push hard anyway and qualify for the most competitive residencies in the most competitive specialties. Some will just keep their nose to the grindstone and do a good job and become good doctors but not shine in the most competitive heights. And some will be slackers who keep malpractice lawyers employed. But they all know what their baseline is, they have a certain margin of comfort, so now their internal motivation and character matter. Really, it's not so different from observing people after tenure. Some make good use of their security and leverage it to greater accomplishment, some just keep on doing decent work, and a few are as lazy as you'd fear.
The 17th to 19th century Western systems of elite education varied in many ways, but they all took the sons of privilege, put them in an environment that combined classical learning with extracurricular pursuits, and told them that they'll all do OK in life but how far beyond that they go will depend on their character, effort, and accomplishment. Those sons of privilege then proceeded to distinguish themselves to varying degrees, and could be observed for all manner of traits, to be recruited (or not) for various paths. It was more like medical school or tenure than the Chinese system of ever-more-competitive exams for ever-higher stakes.
The problem with our elites is not that they got good grades and test scores. The problem is not even that they enjoy privilege and security. Every society has privileged elites--even (and especially) the ones that undertook an ideological project of being "classless." Rather, the problem is that the political system is too closely aligned with sectors that give their greatest rewards to people who play the game for top colleges and then play the game for top law and MBA programs and then play the game to be recruited by the biggest law firms, banks, and corporations. I don't care that elite law firms and banks and big corporations exist and have their games. I care that we have a political class too focused on those elements of the economy, while the middle is hollowed out.
The real solution has nothing to do with universities and everything to do with economic policy. But if you absolutely insist on trying to at least partially improve the elite class through college admissions we are stuck with a paradox: The elites show their character when they are most comfortable, not when they are most competitive. However, there's no morally or socially acceptable to pitch protection or comfort for elites as a solution to inequality. There are far more people who would like to attend Stanford and Harvard and Yale than there are spots at Stanford and Harvard and Yale. The only morally acceptable response is to make the applicants demonstrate (in some way) that they are worthy (by some measure). That measure can be grades, character, writing samples, extracurricular accomplishments, service, interviews, whatever. However, as long as there are way more people who want it than there are spots, and as long as there are huge returns to getting one of those spots, there will be intense competition. Consequently, you will be observing how people compete on grades, or interviews, or service, or whatever, not what they do when they are relaxed.
I have no easy fixes to offer, but my best guess is that you'll have to just accept a certain amount of entrenched elitism, let their kids relax and let their guard down instead of doing 10 different extracurriculars alongside sports and AP classes, and then use some class-based and/or race-based affirmative action to add some non-elite kids to the mix. No competitive formula will fix things. But I'll take some bright young gentlemen (and ladies) who displayed their character from a position of comfort over the socioeconomic elite version of a pre-med.