I have never been much of a university-basher, and in my new book Good and Plenty I attempt to explain why:

The university also injects diversity into the broader societal discovery process. Faculty tenure is based on two principles: free inquiry and intellectual autonomy. Taken together, these principles also could be described by the less favorable sounding phrase "lack of accountability." A tenured faculty member simply is not very accountable to deans and department chairs. This absence of accountability, while it comes under heavy criticism, is part of the virtue of the university. The university works by generating and evaluating ideas according to novel and independent principles, relative to the rest of society. Direct commercial considerations drive most sources of ideas in society, including corporate research and development, commercial culture, advertising, and celebrity culture. The university is an alternative and complementary mechanism for producing and evaluating social ideas. In the university professors are, at least in theory, insulated from direct commercial pressures. Most academic rewards are determined by peer evaluation.

Tenure and non-accountability work especially well for a process that depends on intellectual or creative superstars. The average producer might use lack of accountability to shirk, or to pursue self-indulgent ideas of little value. But the superstars will use lack of accountability to pursue their own visions without outside hindrance. We like to think of "creative freedom" as good, and "lack of accountability" as bad, but in fact they are two sides of the same coin. If most of the value added comes from the superstars, the gains from their freedom may exceed the losses from the shirking of the average producer. Given that most artistic experiments are failures, effective discovery procedures often succeed by supporting the extremes, rather than trying to generate a good outcome in every attempt. 

Since we should evaluate institutions as a bundle, the excesses of the university, which include conservatism and overspecialization, should be seen as part of a broader picture. All methods of producing ideas involve biases. The question is whether these biases tend to offset or exaggerate the other biases — usually commercial — that are already present in the broader system. To the extent the biases are offsetting, the benefits of the university are robust. Counterintuitively, one of the great virtues of commercial society is its ability to augment non-commercial sources of support, including the university. Academic institutions, whatever their particular failings, increase the diversity of the social discovery process, including in the creative arts.

The still under-valued Megan (non-McArdle) writes:

Moving on, Sean asked me how I flirt with the guys I like. “Well, you
know how I am usually friendly and smiley and I talk about dorky
things? Just like that, only more.” “So if you saw a guy you liked…” “I
would probably give him a hug like everyone else, and then tell him
about the things I’ve been thinking about recently. Like right now I’m
super into Geoffrey Chaucer’s blog, so I would be all ‘hah, hah, hah, and then, he makes fun of John Gower, hah hah’.”    “And you still don’t score?” said Sean.  “Remarkable.”

Here is the full and articulate post.  Here are the writer’s two (false) premonitions.  Here is some background on the competition.  Here is the author.  Please restrict your thoughts to the polite, and apply game theory if at all possible.