The PSA system isn't inaccurate and, as far as I've seen, PSA has been accurate in their descriptions and labeling-- but the type system a formulaic or cookie cutter definition of photos, and photos can be more nuanced and complex than the system can define. Joey and I were talking via email about specific examples that don't neatly fit into the type system-- such as a photo made from two negatives (side by side images), one original and one not, and a vintage composite cabinet with a completely original design but the individual player images are technically second generation. There are fine photographs that won't fit into the PSA type system, or at least not fit into the system as some collectors wish.
The below desirable and valuable cabinet is both original (in my opinion, due to the unique intentionally made design) and the image is second generation, because it's a photograph of photographs. Technically speaking it's both original and Type III.
My only concern is with collectors who go strictly by labels and think a photo isn't 'worthy' if it does get a type I label. Often times, the problem isn't the labeling system, but the way collectors narrow mindedly interpret the system. This of course happens with baseball cards and collectors who collect the number of the grade.
A good example are N172 Old Judges, which aren't "type 1" photos, because the images are photos of photos. Obviously Old Judges are valuable as vintage collectibles, and are really collected as trading cards that happen to be photographs, rather than collected as photographs. There are also some extremely rare and valuable 1800s composite photos that aren't type I.
I remember telling an Old Judge collector at the national that N172s are technically not original photographs, and he jokingly said "Shh! Don't tell anyone that."
Now, experienced photo collectors, such as those here know all this stuff, but I just know that there are idle photo collectors who will go strictly by the type label. They would see "Type III" for that cabinet card above and say "I'll pass. I don't collect reprints"-- when the experience 1800s photo collector who know that that's a rare and highly desirable cabinet card.
I also admit that I have a personal psychological and intellectual predilection against neat label systems, cookie cutter genre categories for music and movies, etc. So whenever someone comes out with a label system or 'Top 10 list' for anything, I'm going to look grit my teeth at least a little bit. Of course, card collectors who say "Buy the card, not the label" are often the same way.