Fans of the campus novel keep a special place on their shelves for Morris Zapp, the cocksure protagonist of David Lodge's 1975 novel Changing Places. Zapp is an American professor of English literature whose ambition is to write a series of commentaries on Jane Austen's novels that are so authoritative, they will settle debate on the subject once and for all. By the end of the novel, Zapp's passion has dissipated, his illusions about the nature of literary criticism stifled in the musty corridors of an English red-brick university, lair of the underachieving Philip Swallow. The epitome of all the wishy-washy indecisiveness that sticks in Zapp's craw, Swallow adopts, as his own modest dream of glory, the publication of a collection of his favourite exam questions, "as pregnant and enigmatic as haikus".

Some 35 years on, the ideological battle between Zapp and Swallow through which Lodge characterised the deep identity crisis in British and American universities has been lost and won. The Swallows have long since been pensioned off or, worse, promoted to management. But Zapp has fared no better. His excising of the vagaries of aesthetics from the study of literature has led not to his subject being settled, but to its growth.

By any standards, the past three decades have brought about rampant inflation in humanities research output, fed by a proliferation of critical schools and ideologies. University teaching has been undermined, while the dissemination of research in the humanities across the academy - let alone outside it - has been undermined by the rise of defensively maintained specialisms, often presented as interdisciplinary, but in reality closely insulated by cults of incomprehensibility and obscurity. As a result, fundamental questions concerning the role of arts and humanities education in contemporary society have never been more out of focus than now.

And that, as Zapp might say, is that. Except it isn't. As the American philosopher Martha Nussbaum argues in this limpid polemic, the vacuum left by conventional ideas about the value of education has been filled by an instrumental conception tied not to the notions of citizenship and moral autonomy, but to short-term economic benefit. The stakes, Nussbaum says, could not be higher. "If this trend continues, nations all over the world will soon be producing generations of useful, docile, technically trained machines, rather than complete citizens who can think for themselves, criticise tradition, and understand the significance of another person's sufferings and achievements." The price, in other words, is capitalism's noble partner, liberal democracy.

Nussbaum describes a "worldwide crisis" taking place in education. She identifies the ways in which democracy relies on the values embedded in the arts and humanities. Societies have always used their arts and history as a mirror in which to see, understand and question their own values and desires, their fears and dreams, and their internal contradictions. But the value of the arts, in this respect, is contingent on the ability to think, judge and criticise for oneself.

The citizen educated in the art of following "argument rather than numbers", Nussbaum writes, "is a good person for a democracy to have, the sort of person who would stand up against the pressure to say something false or hasty. A further problem with people who lead the unexamined life is that they often treat one another disrespectfully."

This aspect of tolerance and openness occupies the core of Nussbaum's case. "By generating pleasure in connection with acts of understanding, subversion and cultural reflection", she argues, serious critical study of the arts becomes a crucial factor in the ability to put oneself in another person's place - in order to understand them, to see and feel the world as they feel it, and marvel at its difference, rather than outmanoeuvre them in business or battle.

Nussbaum is a philosopher who has sought to foreground questions of human value over the drier, more quantifiable obsessions of many of her colleagues. But in laying the blame for the perversion of education so squarely with the politicians and their accountants, she is in some respects failing to exercise the capacity for self-criticism that she prizes so highly. The academy must take its share of the blame, too, not least for having failed to educate today's crop of politicians.

In order for it to promote the values and skills Nussbaum describes, education must be considered as a good thing in itself. And for this to be the case, the areas of understanding it takes for its subjects must also be considered as good in themselves. Without this, the whole edifice crumbles. And yet, in the arts at least, it is precisely this notion of the intrinsically good that has been auctioned off by academics, goaded by paymasters envious of the accountability and pseudo-objectivity of the social sciences. As Lodge saw so clearly in the 1970s, the criticism of art and literature - whether in academia or in the equally fraught arena of newspapers and magazines - should never be considered a mere explaining away of phenomena, a decoding of beguilingly gilded puzzles. Rather, it is a matter of helping to see for oneself, through the construction of narratives, perspectives and approaches that do not leave the artwork untouched, but instead touch it all the more deeply, drawing it into meaningful engagement with the wider culture. To ignore this is to embrace the infantile commodity fetishism overrunning us.

Aesthetic value is the reason why objects of beauty are made, and why they must be remade through criticism. Aesthetic value mirrors the way we value each other - which is to say, the kind of value on which the ideas of democracy and moral responsibility are founded - and that is why, when we turn away from it, we turn away from ourselves.

Not for Profit: Why Democracy Needs the Humanities
Martha C Nussbaum
Princeton University Press, 178pp, £15.95

Guy Dammann is music critic of the Times Literary Supplement and teaches at the Guildhall School of Music and Drama.