In Let Colleges Fail: The Power of Creative Destruction in Higher Education, economist Richard Vedder calls for higher education to be subjected to the harsh discipline of the free market. He argues that many colleges are bloated, inefficient, and obsolete—and that the solution is to allow market forces to “creatively destroy” them. In his view, less federal support, more privatization, and greater competition will fix what ails American higher education.
But Vedder’s market fundamentalism ignores the real-world consequences of such policies—and conveniently sidesteps decades of evidence showing that when markets fail, it's working people who bear the costs, not the powerful.
For-Profit Colleges: A Market-Based Disaster
If we want a glimpse into what happens when market logic is unleashed on education, we need only look at the for-profit college sector. For-profit institutions like Corinthian Colleges, ITT Tech, and Education Management Corporation were poster children for market efficiency—until they collapsed under the weight of scandal, fraud, and student exploitation. These schools often charged high tuition for low-quality programs, aggressively marketed to vulnerable populations, and left students saddled with debt and worthless credentials.
Taxpayers ultimately footed the bill through federal student loan programs, while executives walked away with millions. And even now, many for-profit schools continue to operate under new names or private equity ownership, still profiting off federal aid with minimal oversight. If Vedder truly believed in letting failures die, he would have demanded their immediate closure and repayment to the public. Instead, many market advocates stayed silent—or worse, defended them as “innovative.”
Market Hypocrisy: Bailouts for Banks, Austerity for Schools
Vedder's vision also suffers from historical amnesia. During the 2008 financial crisis, the same economists and think tanks who champion “creative destruction” for universities were demanding massive bailouts for Wall Street. The federal government ultimately handed out hundreds of billions of dollars to prop up failing banks, insurers, and automakers—because letting them fail would supposedly destroy the economy.
So why is it that banks and corporations get bailouts, but working-class students and struggling public colleges are told to sink or swim? Why is failure noble when it happens to a rural community college, but catastrophic when it threatens JPMorgan Chase?
The truth is, markets aren’t neutral. They reflect and reinforce existing power structures. And in higher education, unregulated markets have consistently failed to protect students or serve the public good.
The Real Role of Public Investment
Higher education, like health care or clean water, is a public good. It creates informed citizens, social mobility, and innovation. But it requires thoughtful public investment, not just price signals and profit motives.
Rather than letting colleges fail, we should be asking why so many institutions—especially public and minority-serving colleges—are underfunded to begin with. We should be talking about reining in administrative bloat and student loan profiteering, yes—but also about restoring federal and state funding, enforcing accountability on predatory institutions, and protecting academic programs that serve more than just labor market demands.
Conclusion
Vedder’s Let Colleges Fail is a provocative title, but it’s based on a tired and dangerous premise: that markets always know best. The history of for-profit education, the hypocrisy of corporate bailouts, and the lived experience of millions of indebted students tell a very different story. The solution to the crisis in higher education isn’t to let institutions fail—it’s to build a system that prioritizes public responsibility over private gain.
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