I don't think schools used to be more selective... It seems more like the selectivity shifted from being self-selective (only highly apt/able people would apply) to selectivity on the part of the universities themselves.

My father says when he went to Columbia University in the 80's the acceptance rate was >60%. Nowadays Columbia is 7%. It's a similar story with most other colleges. My university used to accept pretty much anyone and now it's <%20. Not sure how that can be spun to say universities are less selective now. Maybe there are more universities, so some of them are less selective than others were in the past. But if you track the same universities over time, they have vastly decreased acceptance rates over time.