Three key American enterprises have seen costs rise much faster than inflation over the past generation, and all three are enterprises in which America leads the world: housing, health care, and higher education. Houses have grown bigger and better, as anyone who has looked at contemporary bathrooms and kitchens knows. Doctors do things they could not imagine a generation ago. Costs may have risen faster than quality, but there is no doubt that quality has risen, and risen substantially.
Higher education is similar--on the cost side. Benefit is another story. There is little reason to believe that undergrads and graduate students are better educated today than a generation ago. More likely the opposite. Teaching loads of senior professors have declined; probably teaching quality has declined with it. The culture of research universities has grown ever more contemptuous of students, especially undergraduates, who are seen as an interruption of one's real work rather than the reason for the enterprise. Which means that, year by year, students and their parents pay more for less. That isn't a sustainable business plan.
I wonder if the underlying point here is not whether the modern research university is an aberration anyway. Operating mostly on looking at universities for the last 30 years, and reading about them in the preceding 100 (see, eg, Henry Adams' autobiography) it would seem to me that the modern university in the US is largely an unexpected side effect of the massive government research support that followed WWII.
Certainly that seems to have a lot to do with the rise of the highly paid "celebrity" professor who doesn't actually teach or even publish scholarly work any longer (Stan Fish and Cornell West, call your offices.)
In the mean time, though, I can download whole MIT technical courses into my iPod, and access a virtual library of Alexandria from my living room.