From Dean Dad's blog in Inside Higher Ed, some quotes:
It's certainly true that people can learn important things outside of credit-bearing classes. And in some parts of the curriculum, even the stodgier colleges have long had provisions for students to "test out" of individual courses. The idea there is there's little point in marching you through a course when you've already mastered its key content.
While that model isn't new, it has historically been confined to the margins. An AP course here, a CLEP there, but you still have to take enough credits to graduate.
Credit hours are bureaucratic constructs that have little to do with teaching. They're ways of breaking curricula into component parts, the better to allow for transfer, substitution, and the like. (In most states, they've also become tied to various funding formulae. We measure our enrollment both in terms of headcount -- that is, people -- and FTE's, which are denominated in credit hours.) They make inevitable a cost spiral that far outplaces inflation, since you can't increase productivity when your units are measured in time. (As the rest of the economy becomes more productive per hour and teaching doesn't, teaching becomes relatively more expensive.)
Awarding some sort of recognition for task completion or demonstrated competence independent of the time it took to achieve that offers one potential way to break the upward spiral. If you manage to blast through calculus in eight weeks instead of fifteen, more power to you.
That said, though, I could easily envision the abandonment of the credit hour as relatively beneficial to those already on top...and devastating to the rest.
To the extent that we move from "here's what you need to do" to "what do you want?," we both enable high achievers to cut loose - a clear good - and allow the less savvy to wander aimlessly, which is a real problem.
If colleges are going to continue to earn their keep, they'll need to address the very real economic issue of the credit hour, without forfeiting the real value created by making courses of study - as opposed to individual courses - legible. That means not giving up on 'general education,' no matter how much some students bitch about it. It also means getting out in front of a competence-driven currency, lest it leave us behind. It probably means making convincing arguments to the effect that an education is more than the sum of its parts. (Hint: the social and extracurricular aspects are not to be discounted.)
As disconcerting as some of that is, I'd hate to see colleges go the way of newspapers. When the mode of production changes, typically, the leading producers change, too. The mode of production of education has to change, and now, can. We'll need to come to grips with that in some sort of serious way, or others will, edupunks or not.