I think that's a pretty poor generalization. I cannot speak for Harvard and Yale, but that's far less important at a lower Ivy, like Cornell for example. In general, I will say that at any of the "elite" schools there is a large proportion of students who had a leg-up b/c of alumni connections, but there are many more who got in b/c of the merits, however, skewed those merits might be.
Certainly at Harvard and Yale what you are describing happened a lot more. However, at least Levy did not get into the master's program (after getting into Harvard Law) b/c of those connections. His background belies that idea.
Now, I went to Cornell so I will be a little biased, but bear with me. Here's how I view the whole debate going on in this thread (I was an economics major)...
1. There are lot of people at the Ivies who are complete idiots.
2. There are tons of smart people from other schools.
3. What gets you into an Ivy League school isn't often enough to give you success. Getting great grades and high test scores doesn't test all intelligence and skills. Hard work, drive, smart risk taking and talent get you success, IMO.
4. Getting an Ivy League education and getting poor grades while doing that will usually put you at a disadvantage when competing with the top students from a "lesser" school.
On Liberal Arts:
1. History and similar fields requires plenty of intelligence. It taps on skills different from those that an engineer has. (I respect engineering, my father is in the field).
2. An engineer has clearer job choices, but a liberal arts major can develop writing skills that will help in a wide-variety of jobs and graduate fields.
3. The smartest thing to do, if you are good at a technical field and actually will enjoy it, is to major in that and take a lot of classes that develop your writing skills.