And so on and so forth. The people that actually do the bulk of the teaching in many schools -- adjuncts and grad students -- get paid very very poorly. Even in schools that claim to have a high ratio of tenured faculty teaching classes, if you dig into it you will often find teaching assistants doing a lot of the direct student interaction and almost all of the feedback.
I think many tenured professors don't deserve it, and schools have very bloated administrations. They also have mispriced priorities. (Subsidizing luxury dorms, athletic facilities, etc)
No man, or organization, can serve two masters. Either these schools are about undergraduate education or they aren't. The counterargument about presige isn't completly wrong. Prestige of the school is valuable to a degree holder. But all the universities chasing after the same limited pool of prestige is socially wasteful, and these heavily tax subsidized institutions are supposed to be advancing the social interest.
We should have separate institutions that do research and perhaps train grad students.
They aren't. When has this ever been a question? That doesn't change the fact that starry-eyed undegrads want to bask in the light of famous members of their field.
Imagine Feynman was still teaching, but was terrible at it. Would that stop countless people scrambling to get into the university he teaches at, simply to get exposure to his prowess and dream of working in his lab?
Research universities are a natural place for undergraduates. It's a symbiotic relationship. The University has use for willing young minds and hands, and willing young minds flock to the places where the knowledge is.
P.S. Don't forget star professors are often stars because of how much funding they bring to the university. It's not like undergrads are bearing the brunt of funding their laboratories.
In any case, it doesn't matter if the class size is 10 or 50. You still need to prepare the same material, you still need to be there for the same amount of time. $3500/class sounds like a bargain to me. A TA earns more.
OK, but how are the professors expected to live on that ? Independently rich or retired cannot account for any size-able number. CC are subsidized by the state and county, or at least should be.