Anyway, this was surprising to me because I would naively predict that, if we were talking about almost any other product, we would begin to see less bureaucratically bloated competitors offering it for cheaper and driving the price down. What's unique about university that stops this from happening?

We do see competition.

ETA: Two additional points:

• A lot of the spending/waste is on prestige projects like new buildings, rather than on administrators.

• If you're wondering why nobody is challenging the top schools, I have three responses:

1) It would require too high an initial investment. 2) It would require attracting top students, which is more difficult given scholarships and lack of reputation. 3) This college is trying to do so.