The market is a highly effective tool when people need to be motivated to acquire specific knowledge and skills—for example, to qualify as an electrician or learn Spanish. This assumes, however, that demand is stable and long-term, that financial barriers are not significant, that the population already possesses sufficient basic knowledge and abilities (I will return to this point), and probably that a number of other conditions are met as well.
Among those necessary conditions are a solid general education, reading comprehension, a broad vocabulary, good study habits, extensive familiarity with technical fields and the natural sciences, knowledge of rational methods of problem-solving, and so forth. Without a well-educated population, people are unable to respond effectively to market incentives. This is something the United States is discovering today, where efforts to rebuild industry have run into both a shortage of skilled workers and an inability to retrain the existing workforce. More on this here.
If, however, the creation of this broader educational foundation is left to the market, the result will be a population of poorly educated people. We know of no historical case in which the outcome was otherwise. This is quite logical: the costs are immediate, while the benefits are distant and uncertain. Only a small part of the population—the wealthiest and best educated—can afford such an investment. More on this here.
Creating an educated population is a task for political authority. It must give that task a clear form, enforce it against resistance from numerous groups (even compulsory schooling was once enormously controversial, which is precisely why it had to be compulsory), and establish how the costs are to be shared.
Political authority should also state clearly what kind of national economy it intends to create and what kind of education that economy requires. It should then implement the corresponding measures. More on this here.
Universities—and indeed educational institutions of every kind—are merely instruments for achieving that level of education, both general education and the acquisition of specialized skills. The question is how exactly they should be used for this purpose, and whether, in their present form, they are suitable instruments at all. It may well be that a large part of the university system has deteriorated to such an extent that it would be better to stop funding it and build something entirely new from the ground up.
As long as education policy begins with the question, “How can we support existing institutions?”, there is little hope that it will succeed. In the Czech Republic today, one reason is that these institutions have undergone years of steady decline and falling standards. The education system of the 1980s would meet today’s requirements better than the current one, but simply preserving that system would not have been a solution either. Education policy must begin with a vision of an educated population, not with the needs of institutions. More on this here.
The ability to learn is more important than any particular body of knowledge. Given the length of modern working lives, changing technologies, and pervasive uncertainty, it is impossible to find a qualification that a person can acquire once and rely on for decades. A national vision of education must take this into account as well.