Judge Posner, compares job security and the economic consequences of different models. He notes that academic tenure has been scrapped in England and suggests it has no longer a place in the U.S. and is likely to be scrapped here as well:
I do not think tenure makes a great deal of sense any longer in the academic setting, and I expect to see it gradually abandoned. (It has already been abandoned in England, for example.) If a university wishes to offer its faculty protection against political retaliation for unpopular views, it can do that by writing into the employment contract that politics is an impermissible ground for termination. Tenure is no longer needed because of an absence of performance measures. These measures exist in abundance. Quality of teaching is readily measurable by student evaluations, provided care is taken to prevent teachers from courting popularity by easy grading and light assignments and student evaluations are supplemented by faculty observation of the classroom. Quality of research is readily measurable by grants, prizes, and above all by citations to the professor's scholarly publications, weighted by the quality of the journal in which the citations appear.
In some fields, such as mathematics, there is generally a significant falling off in academic output at a young age, and there is fear that without tenure these faculty would be turned out to pasture long before retirement age. But this is no different from the situation in professional sports, modeling, and other youthful occupations, where it is handled by an alteration in the wage profile. If a career in mathematics entails a sharp fall-off in market wages after, say, age 40, the academic market will compensate by offering disproportionately high wages to young mathematicians; otherwise, talented mathematicians will choose professions, such as economics, in which math skills are valued but productivity does not decline steeply with age.
One reason for the superior productivity of U.S. compared to European workers is that tenure encourages lazinesss by reducing the cost of laziness to the worker. But that is not the principal problem. Tenure removes the stick but not necessarily the carrot. More productive professors can be paid more and, even if their university has a lock-step compensation system, can obtain prestige and outside income by outstanding performance. The greater cost of tenure is simply in forcing retention of inferior employees. The 80-year-old mathematician may be working hard, but he may be incapable of achieving the output of the 25-year-old mathematician who would take his place were it not for tenure. Note how governmental prohibition of compulsory retirement at a fixed age aggravates the inefficiency of tenure--and is no doubt contributing to its eventual abandonment.
Perhaps the strongest argument for academic tenure is that without it academics would be reluctant to undertake promising projects with a high risk of failure. But the situation is no different in "knowledge" firms such as software and pharmaceutical-drug producers, which encourage their scientists to undertake high-risk projects--and do not think it necessary to offer tenure. If most good new ideas are produced by young academics, then an institution that raises the average age of faculty, namely tenure, seems likely to reduce academic productivity. An interesting empirical project, therefore, would be to study the effect of England's abolition of tenure on the average age and productivity of English university faculties.
Thomas Lifson comments:
He's right, of course, about the downside. But he underestimates the resistance.
The problem is that higher education itself is so insulated from market forces. Not the effort to increase subsidies for student loans, which enables further tuition increases beyond already extortionate levels. Faculties already control universities (ask Larry Summers), and they will hang onto tenure.