The Academic Tournament
Economists don't like tournaments, structures where a bunch of people compete for a benefit that only the winner will enjoy. Economically, they are wasteful, since immense effort is expended, futilely expended for all but the winner. By contrast, deffort expended in production benefits both producer and consumer. The human race, by contrast with homo economicus, is highly addicted to tournaments. See for example, every sports league, political contest, a billion reality television shows, the various lotteries, and much else.
Of course this is just one more confirmation that neo-classical economics fails to capture a lot of crucial aspects of human nature. Life, and evolution, are a tournament, a tournament where we are all ultimately losers, but we are programmed to fight to stay in the game as long as possible.
That doesn't change the fact that tournaments are economically wasteful, and probably best confined as much to the entertainment sector as possible.
One of our most expensive tournaments, and hence one of the most wasteful ones, is our system of graduate education and academic employment. Of late there has been a fair amount of wailing and gnashing of teeth about the economic and psychological futility of getting a PhD in the humanities, e.g. Rebecca Shuman's Thesis Hatement, the point being that years of degrading slave labor leave you with no employable skills and, frequently, crushing debt. The situation for PhDs in the sciences and engineering is only slightly more favorable, mostly because they can usually get finacial support while going to school, but also because they can probably find jobs. Mostly those jobs pay just about the same as the ones they could get with a Master's degree. See, e.g., The Economist, The Disposable Academic.
There are a lot of perverse incentives built into the system that overproduces PhDs, especially research grants that demand or reward PhD production. Perhaps even more important is the existence of grad students and post docs as a cheap and discardable source of labor. There are 189 US universities that grant PhD's in physics. Most of them produce only a few per year.