A strong case can be made for research institutions such as Brookings or RAND, and a case can be made for having some of them located on a university campus. The Hoover Institution, ranked number one in the world by "The Economist" magazine, is located on the campus of Stanford University.
It is a lot harder to make a case for having research institutions supported by taxpayers under the false pretense that their main job is teaching students -- as happens with flagship state universities. When students and their parents are choosing a college, they need to understand that these students are less likely to be taught by the famous professors at famous state universities than they are to be taught by graduate students who are there primarily to study under those professors.
Research universities could be allowed to privatize and sell off some of their operations, such as teaching. Responsibility for teaching undergraduates could thus be taken out of the hands of graduate students and junior faculty, and transferred to teaching institutions, including on-line institutions like the University of Phoenix.
On-line teaching may never be as good as direct contact with a professor dedicated to teaching. But it may still be an improvement over being taught by a graduate student who gives top priority to completing his own education and beginning a career. A research institution does not need a costly football stadium or student dormitories or a swimming pool.
What stands in the way of such rational reorganizations are inertia, false impressions, traditions and politics. As the president of Texas A & M University said of the state legislature:
"They pay 20 percent and control 100 percent. Why would they give that up?"