I don’t think it’s accurate to say that people are being “fooled”.
Professors at other institutions are going to rate Yale’s history department as outstanding because they’ve had students at their own institutions, working on a doctorate in history, who got a BA from Yale. And even if they can’t name every single professor in the department, they have read the work, or attended a symposium, or noticed who got a Pulitzer last year for a historical work. And over time- the perception (hey, Yale seems really strong in history) gets reinforced by reality (the students we’ve accepted from Yale for our doctoral program, over the last two decades have been outstanding).
Moreover, you’re going to have to work really, really hard to find someone in academia who actually “knows stuff” (not the guy at your dry cleaners who thinks anyone who doesn’t study nursing or accounting is an idiot) who is going to say “Yale’s history department is mediocre”.
The Caveat Emptor warning comes into play when a student (or family) doesn’t actually “value” the academic reputation. They want the kid’s ticket punched– a Bachelor’s degree in something or other- and they want the kid to meet “people like us” to launch into the adulthood they aspire to for their kid. So maybe Yale is the wrong place for the kid. Majoring in history there (or another 25 things) is going to be a HELLUVA lot of work if all the kid wants to do is to join a frat or secret society and play beer pong. So do your homework. Make sure the “reputation” is aligned with what your kid actually wants out of his or her education.
Don’t go to Swarthmore if the kid wants to phone it in. The place has an excellent reputation for academic rigor- and it is well deserved. If you aren’t looking for rigor, it’s the wrong place.