The following is probably a bit long, but this pebble has been in my shoe for half my life. Also forgive the rather abstract initial paragraphs–
There’s a bit of semantic imprecision in Cory’s original post, borrowed, to be sure, from the general discussion. No social good is good “in itself,” any more than such a good is ever “free.” A non-exhaustive list of questions would include “good for what?” and “good for whom?” and “how good?” Matters of cost cross those questions, and since “cost” is connected to the allocation of finite resources, the matter of “payment” depends on an audit of the resources required to deliver the goods (deliberate play on words there) and decisions about priorities.
The trouble with accounting for social goods (individual and public health, education, public safety, infrastructure) is that while the benefits of some of them can be quantified, others can’t–at least not with the tools used by businesses to decide whether it would be a good idea to open a new store or change a supplier or add or eliminate a product line.
Economic and business-practice metaphors don’t map well onto the complex, um, business of running a society. If the value of education is simply the production of workers with skill-sets that allow them to support themselves and keep things operating, then business-style cost-benefit accounting makes sense. If there are less material, less quantifiable benefits, then the accounting gets a lot more complicated–in fact, “accounting” becomes a metaphor for thinking through the point of the whole activity.
I grew up in a nation that thought higher education important enough to provide multiple means of access for those who earlier would not have been able to afford it: state colleges and (in New York State) a scholarship system that fed into private schools. (Most of my private-college tuition was covered by a Regents Scholarship.) The New York State public college system was driven primarily by a perceived need for teachers, farmers, and foresters, but the effect was also to open college to the children of families who in earlier times would have topped out at high school. Then there’s the history of CCNY, especially in the first half of the 20th century, and all those land-grant universities west of NY.
The political arguments that drove this all were, to be sure, often utilitarian or pragmatic (for example, the Cold War rivalry that justified the loans and fellowships of the National Defense Education Act). Nevertheless, my blue-collar parents saw education as both a practical/economic and a personal/civic good, and my recollection is that the latter edged out the former.
A side note: When I started college, the professoriate was not particularly highly paid, at least compared to other professions that required extensive graduate education. Nor was the administrative overhead as extensive and expensive as it is now. Both of those gradually changed, thanks perhaps to the baby-boom-driven expansion of the post-secondary segment and the economic good times. But the internal economics of the university are not quite at the center of this discussion, though they certainly contribute to the intensity of the problem.