The argument goes something like this:
"Elves and dwarves live so much longer than humans that they would have to gain XP slower and hit a cap. If they advanced at the same rate as humans, then the setting will be dominated by elves and dwarves of god-like power. After all, if humans can hit level 14 in their meager lifetimes, what could an elf do with a couple hundred years to blow adventuring?"It's one of those arguments that makes a good deal of sense at first blush, but for a number of reasons I've never put much stock in it.
The first is that NPCs are not PCs. Older versions of the game don't bother to treat NPCs with the same kind of care and logistics that we treat PCs with in the first place. OD&D claims that for every 50 elves encounered in a group, one of these will have "above normal" capabilities. Normal being "something other than a 1HD creature." It then asks you to roll some dice to determine its magic and fighting levels. According to the AD&D monster manual "For every 20 elves in a band, there will be one with above average fighting ability (2nd, or 3rd level). For every 40 elves encountered, there will be one with this fighting ability plus a 1st or 2nd level magic-user ability." The important takeaway here is that the majority of elves you bump into aren't adventurers in the same way that the majority of humans you bump into aren't adventurers. PCs are level 1 characters in a level 0 world.
The second is that prior to AD&D2e, the main source of experience for characters was gold. This has some very important implications. The first and most obvious being that you don't get XP just for living a very long time. Even elves have to go out there and schlep their dainty arses through the same mud and blood and bog that the rest of us adventuring folk have to and put themselves in just as much danger for every experience point earned.
The second and more profound implication is that assumption that the reason for adventuring is to get rich. You are out there to acquire treasure. The game is explicitly about going out into the unknown in search of gold. A funny thing happens over time, however. The richer you are, the harder it is to justify schleping your ass into some gods-forsaken cave where something is certainly bound to try to eat you. You already have more gold than you could possibly spend. This is actually built into the endgame of D&D as well. There is an assumption in early editions that you'd eventually start to settle down in a region, build a stronghold, acquire followers, and begin to play on a more regional level rather than a personal one. Your actions play out on a broader stage. At this point, it takes a lot more gold to convince you that it's worth putting your life in danger and hoards of that size are few and far between. You reach a natural equilibrium at a certain point and eventually retire from adventuring to manage other things.
The TL;DR of this is that it's easy to ignore the "elven lifespan" problem simply by arguing that even with their longer lifespan there is no reason to assume that their adventuring careers would be any longer than any other races. After all, what is the likelihood of Bill Gates coming out of retirement to work a hotdog stand any time soon?