The problem is that having a large body of grad students increases your research output, allowing you to get more grants and raise the prestige of your institution at a relatively low cost. Universities are incentivized to admit more grad students if it leads to these improved outcomes.
And more students running your labs/substituting you for teaching/etc. means more time to do non-teaching stuff, which is a net positive for most professors.
How sad was I to realize that I was the only one in my PhD program who had chosen that route because I was as passionate about teaching as I was about research!
Feynman:
If you're teaching a class, you can think about the elementary things that you know very well. These things are kind of fun and delightful. It doesn't do any harm to think them over again. Is there a better way to present them? Are there any new problems associated with them? Are there any new thoughts you can make about them? The elementary things are easy to think about; if you can't think of a new thought, no harm done; what you thought about it before is good enough for the class. If you do think of something new, you're rather pleased that you have a new way of looking at it.
The questions of the students are often the source of new research. They often ask profound questions that I've thought about at times and then given up on, so to speak, for a while. It wouldn't do me any harm to think about them again and see if I can go any further now. The students may not be able to see the thing I want to answer, or the subtleties I want to think about, but they remind me of a problem by asking questions in the neighborhood of that problem. It's not so easy to remind yourself of these things.
It's not just selfish. If the school admitted fewer anthropology grad students, the marginal rejected candidate would say "Just let me in, I don't need to be guaranteed a postdoctoral position, and I'll work for a pittance -- I just really want to do my PhD." How is not admitting them kinder when they're beating down the doors to be let in and "exploited"?
