I want educational institutions to be merit based, but when I read this comment I just think of family names being thrown around.
If you shred cultural continuity mechanisms, eg legacy admissions forming a persistent community, you erode the very thing that made your society better than average.
"Social capital" is a term of art in sociology meaning "the network of relationships within a particular society", in this case a university. Robert Putnam has written extensively about the empirical benefits of high social capital, which include efficient allocation of resources, lower stress, and prosocial behavior.
A newly admitted student whose social network shares 0 nodes with the university's formal network makes no initial contribution to the university's social connectedness within the universe of people formally affiliated with the university. Whereas the legacy student is already socially connected at the moment of admission.