We should happily let colleges fail so that better ones can emerge.

One of the most annoying cliches is that our higher education system is the envy of the world. The truth is that it’s a terrible bargain for the people — a huge drain on resources with low and falling educational results. Why is that the case?

In his new book, Let Colleges Fail, economics professor Richard Vedder examines that question and has several excellent ideas for change. In today’s Martin Center article, I review Vedder’s book.

The roots of the problem are that most of our educational sector is nonprofit and thus shielded from the incentives in the market to improve quality and reduce costs, and that government heavily subsidizes college attendance. He would like to see the federal government stop hounding the few for-profit schools and either dramatically reform its student aid policies or get out of student aid entirely.

Vedder also recommends a national college exam so we will have some reliable information on how well or poorly schools do in improving their students’ knowledge and skills.

As for the faculty, their incentives are badly misaligned, with an emphasis on research (most of which, Vedder observes, is useless) over teaching. If market competition were unleashed, schools would look for more effective ways of using their faculty (and other) resources.

For many years, Vedder has been arguing that government policy is impeding efficiency in higher education, and now that the bubble is deflating, we should happily let colleges fail so that better ones can emerge.