I agree with this outlook. The 'product' of elite academic institutions is academicians capable of working within elite academic environments. In other words, these elite institutions act as their own incubators, selecting only a small proportion of their PhD students and post-docs to join their faculty.
As you say, it is unclear what the actual 'product' of low tier schools actually is - yes, many will graduate with a PhD funded by public and/or private grants, but ultimately low tier PhDs aren't valued much by either the academic or industry job markets. One possible explanation is that the 'product' of the low tier PhD programs is to further the existence of the PhD program.
As you say, it is unclear what the actual 'product' of low tier schools actually is - yes, many will graduate with a PhD funded by public and/or private grants, but ultimately low tier PhDs aren't valued much by either the academic or industry job markets. One possible explanation is that the 'product' of the low tier PhD programs is to further the existence of the PhD program.
Edited for clarity