My guess is The Good Place is to blame for the fucked up system. I think the show gave us a hint with Doug. Doug was willing to subject himself to misery and pain, and allow bad/evil people to take advantage of him, in order to make others happy. Let's expand that on a massive scale. At some point 500 years ago or so, maybe the Good Place decided that they wanted to make the Bad Place happy and they rationalized that everyone should go to the Bad Place because a) if they are bad, they belong there b) if they are truly good, then they should be ok with the idea that their eternal suffering makes others happy (the demons). Since demons are essentially immortal, then maybe they consider their continued happiness to be a much greater good when compared with the virtual flash in the pan lifespan of a human in comparison.