[eaq]

At least in science/engineering: not really. Faculty positions are saturated, only one in three PhDs will get hired as an assistant professor, let alone receive tenure. One could argue that the number of graduate students is hugely inflated, since they're such cheap labor.

[jessaustin]

That's not the mechanism I'm considering. I was under the impression that most researching professors needed lots of grad students in order to get grants, and they needed grants in order to exist?

[danieltillett]

Yes it would tend to reduce demand for professors, but if there was fewer professors the grant success rate would be higher. Less competition for grant funding should have a positive influence on the quality of science as people should feel under less pressure to rush out results.

The current academic system is a Ponzi scheme that has to end at some stage and it might as well be now.