No the classes aren't harder, but the students are better. It's not inflation when good students do well.
Well the data doesn't seem to agree with that simple explanation.
http:///www.gradeinflation.com/
While grades have been inflated at all schools in recent years, they seem to have been more so at elite private ones. Why? Well according to you it is simply caliber of students, I think it is a bit more complicated than that. One of the main points of going to an elite private school is that it is the best of the best competing in a rigorous environment. The rigor of the curriculum is supposedly much more difficult and therefor should offset the fact that the average student is of a higher caliber than the average state school.
The reality, in my mind, is that the advantage of elite private schools is the size of the classes and access to professors. The grades are inflated at these institutions for two primary reasons: 1) To keep their prestige, and 2) Money. Alumni are not as willing to give large sums of money to schools with low GPA's. Likewise, the more students from these schools that get in to competitive, lucrative, and elite professional schools, like med school, the more prestige these institutions attain.
It is detrimental to these elite schools to have the same average GPA as state schools because all of a sudden they don't look so elite.
I am not saying that the caliber of students at these schools isn't high. Obviously they are some of the best in the country, or indeed the world. What I am saying is that the grade inflation may not have anything to do with the quality of students. Big state schools can't have everyone getting A's and need a way to regulate it. Private schools don't have that problem.
Lastly, we must consider why grades have been inflated at all institutions. Well, again I think money has a lot to do with it. But also, and not to sound like an old man at 24, but I think students today really do expect more handed to them. Students who have had all A's in high school can be fairly traumatized by poor grades when they get in to college. Is is possible that disgruntled parents are more likely to stick up for little Johnny at a private school than public when it comes to this situation? I don't know, maybe, who knows?
I just think it is a little more complicated than you make it out to be.