I don't know Manton- we really need the steady supply of research grade engineers and scientists, and that relies on lots of people wanting to be graduate students. Having said that we need graduate students, I'll add that the happiest end-of-the-academic-track people I know were those bailing out after a Masters degree. Folks are especially bitter if after getting a PhD they can't find a Postdoc. Postdocs that can't find a faculty position tend to be resigned to their fate. Here's a link to Nature's special issue on it in April 2011 but it may not be free (non-communists!), so here is a link to their editorial. Even the hard sciences are coming around to the idea that creating Ph.D.s, then dumping them onto the job market may not be a good diea. I swear I once saw a paper on "The Pollution Model of Ph.D Overproduction", back in the early 90's, but I can't seem to find it.