It's simple: cap the program at a fixed number of years (TC: five?) and let the market clear with whatever people have done in the meantime. It's not fair to people who get sick but if that's the only cost maybe it's still worth doing. (Is there a credible way to make exceptions?) And instead of a dissertation require one good published article.
Anyway, that's the proposal in the new Louis Menand book, The Marketplace of Ideas: Reform and Resistance in the American University.
There is a behavioral argument for this policy — it is anti-procrastination – and a zero-sum status game argument for it, namely that if more people went on the market "unfinished" the stigma would lessen and everyone would save some time. The overall rank ordering probably wouldn't be much different.
But are these people ready? Menand has an effective zinger:
The argument that they need the [extra] training to teach the undergraduates is belied by the fact that they are already teaching undergraduates.
Overall his book is a stimulating read, whether or not you've spent more than five years in graduate school.