If Paul Graham and Paul Krugman are right and the modern research university is doomed, why are conservatives and moderates so fixated on the alleged left-wing bias of the academy? Krugman's sketch of the medium term future sounds right to me.
Eventually, of course, the eroding payoff to higher education created a crisis in the education industry itself. Why should a student put herself through four years of college and several years of postgraduate work in order to acquire academic credentials with hardly any monetary value? These days jobs that require only six or twelve months of vocational training -- paranursing, carpentry, household maintenance (a profession that has taken over much of the housework that used to be done by unpaid spouses), and so on -- pay nearly as much as one can expect to earn with a master's degree, and more than one can expect to earn with a Ph.D.. And so enrollment in colleges and universities has dropped almost two-thirds since its turn-of-the-century peak. Many institutions of higher education could not survive this harsher environment. The famous universities mostly did manage to cope, but only by changing their character and reverting to an older role. Today a place like Harvard is, as it was in the 19th century, more of a social institution than a scholarly one -- a place for the children of the wealthy to refine their social graces and make friends with others of the same class.
Making friends, as Graham noted, is not trivial. It is really, really important. But of course it can happen beyond a college campus, and some (like Nat Torkington) have argued that new technologies have allowed us to scale up these networks.
Most higher education in the United States happens in non-elite, non-selective institutions that deliver valuable skills at a too-high cost. The elite, selective slices of higher education are essentially extremely expensive theme parks staffed by highly-educated people who like ideas and having a fairly relaxed schedule. There are, to be sure, exceptions like the brilliant Anthony Kronman who pursue a distinctive mission, to groom leaders, etc. Most use the small handful of Kronmans to valorize what is an attractive, harmless, yet not obviously particularly noble lifestyle choice. I say leave them in peace.
This is also why I think the fight over preferential policies in higher education is an utterly counterproductive sideshow: if these policies really do exist for the psychic benefit of a handful of administrators, leave them in peace and help those who bear the brunt of these policies, and here I mean students negatively impacted by mismatch who belong to all groups, both underrepresented and overrepresented, in some other way. Let's fight poverty, let's help parents stay together, and let's be sure that poor children get more hours of direct instruction. These steps will have a far more meaningful impact on our collective well-being.