IT'S THE ARROW IMPOSSIBILITY THEOREM. Highered Intelligence poses a problem:

"1) A government has 8 programs, call them 1-8.
2) 75% of the people want to reduce government spending.
3) No single government program has at least 50% of the people who want to get rid of it.
4) Spending does not get reduced.

"I don't know what this is called, but there was a name for it. Something similar might be happening with collegiate education. EVERYONE wants diplomas to be worth more, but the students don't want to do the extra work and the schools don't want to lose their customers and ultimately no one is willing to take it on the chin because everyone's benefiting in one way or another from the current system."

The first phenomenon is a voting paradox. There are a lot of those out there. The second has elements of a prisoners' dilemma, but there may be sufficiently many participants in the higher education enterprise to resolve it. Consider, first, that parents often make great sacrifices to get their kids into name schools (there's a rant coming on that vanishing middle class, probably tomorrow, which is connected to those sacrifices) and thus the students do the extra work (often the wrong kind of extra work) in high school to get into the prestige colleges and often apply themselves once they get there. As noted here, the students recognize that they are in fact not benefitting from the current system, if they're encountering schedule-completion hassles.

The prisoners' dilemma problem arises during the periods of slack enrollment, as I've discovered in conversations with colleagues, some of whom have been around these parts longer than I (yes, there are a few ... I'm amused when the Up-and-Coming seminar speaker reacts with a "wow" when they discover I've been seventeen years in one place) and who report that there is hysteresis in high-school advising. A college that tightens its admission standards in the fat years carries that reputation into the lean years, when the admissions office might have slackened standards a bit. The problem there, however, is not with the hysteresis but with the university's planning. Middle school enrollment patterns are often a pretty good indicator of college application patterns five to six years down the road, but in the thirty years I've been observing planning I've noticed promiscuous neglect of such evidence, beginning with the University of Wisconsin building a very nice dorm, erm, residence hall along the lake shore that was never used as such. (The University of Chicago's curricular reforms of the late 1990s were particularly ill-timed. Not only did they engender ill will with graduates, but they were addressing an enrollments problem that was going to go away in a few years. And an economist was leading the charge to make the change. I don't have that many hairs to pull out.)

Hypothesis: there is an equilibrium in which standards are higher and students do more work, and there are gains from trade in making those things happen.