Why don't more people go to nonexistent colleges? Take a wild guess.

Ryan Avent notes that one reason Americans' median income has stalled might be that our education level is no longer increasing:

[A] world in which the average student does not get multiple years of post-secondary education—in occupational or technical training or in professional or typical undergraduate studies—is one in which a large share of the population is languishing in fields that pay poorly or that are subject to competition from lower wage labour abroad or automation.

Ignoring for the moment the fact that American public education is crap, there are two reasons for this: Fewer people are graduating high school, and the number of people going to college has stayed flat.

Why haven't more people gone to college, even as the benefit (the college wage premium) has increased massively since the 1980s? Obvious answer: the supply of college spots is fixed. The government simply hasn't built any new colleges or expanded existing colleges in a long time.

So why don't we see private colleges? In fact, all private universities (with the exception of distance-education businesses like University of Phoenix) are nonprofits. There's a substantial economics literature that argues that information asymmetries and uncertainty combine to make higher education the kind of thing that only governments and nonprofits are willing to provide. Thus, colleges are a public good: if the government doesn't provide them, no one will.

Note that if you have fixed supply and an increase in demand, you see prices rapidly bid upward. This is exactly what we have seen in the higher education market - no new spots, but an increasing college wage premium that boosts demand for those spots. Result: skyrocketing tuition.

Conclusion: One very important thing we should do to keep our country growing is to have our government create more colleges.