Tyler Cowen thinks having students pay directly to professors is a good idea for his university. Students at William and Mary are now contributing to a fund to help retain their best teachers. Says Prof. Cowen,

I expect that over time, for better or worse, many state universities will in effect become privatized. They will remain under nominal state control, but their finances will rely increasingly on private sources of support.

Madsen Pirie says that at Hillsdale College students were able to add up to 10% to faculty wages, and that the evaluations were not a function of grades. Adam Smith himself once noted,

If in each college the tutor or teacher, who was to instruct each student in all arts and sciences, should not be voluntarily chosen by the student, but appointed by the head of the college; and if, in case of neglect, inability, or bad usage, the student should not be allowed to change him for another, without leave first asked and obtained, such a regulation would not only tend very much to extinguish all emulation among the different tutors of the same college, but to diminish very much in all of them the necessity of diligence and of attention to their respective pupils. Such teachers, though very well paid by their students, might be as much disposed to neglect them as those who are not paid by them at all, or who have no other recompense but their salary.

If watching for effective teaching is subject to high monitoring costs for administrators, why not empower students themselves in this way? Could this work in the modern university? Or could vouchers be an alternative?