IN 1964, Harvard English professor Warner Berthoff dedicated a book on American literary criticism to "the good old causes: liberalism and democracy." An interesting choice of words, for none have fought for liberalism more staunchly than America's universities.

Now, the U.S. Justice Department has launched an inquiry at Harvard and more than 60 other colleges and universities nationwide that recasts the battle over the "good old causes." Namely, the government is investigating whether the schools--which include the most prestigious in the country--illegally colluded in business arrangements to set tuitions, salaries and undergraduate financial aid that violate anti-trust laws.

If accurately portrayed, financial collusion at the expense of students, faculty and other employees is a most illiberal, exploitative practice amounting to millions of dollars. But since the inquiry was made public by The Wall Street Journal and other media heavy-weights in August, a lot of documents, press releases, legalistic arguments and philosophical points have been bandied about. The massive and unprecedented Justice Department review will likely take months to clear the confusion.

But the fundamental question returns to this: are the elite universities the ones to judge if they are above the point of the anti-trust laws, i.e. promoting fair and open competition to serve the public?

FIRST, consider the facts. Media reports and university officers willing to comment have made the following clear:

Some schools at the most expensive end of higher education--those that like Ivy League members charge more than $15,000 in tuition, room board and fees a year--plan tuition raises together, often before such financial information is publicly available; the same schools jointly raise tuitions frequently to harvest the prestige tied to expense; a group of 23 elite Northeastern colleges known as the "Overlap" group meets annually to set undergraduate financial aid packages; and, finally those willing to comment say such practices are done publicly with the assumption that agreements avoid "unethical bidding wars" for top students. They argue that the schools thus can spread around financial aid money to the most needy, mitigate the factor of money in obtaining higher education and hence serve the public good.

The immediate legal problem can be seen in an analogy to gas stations. Say the stations with the best gas in town all decide on gas prices, and also on the discount they give preferred (even "needy") customers. Further, the practice raises the question of whether the service station owners fix the wages of their attendants, or the price for accessories like windshield wipers. The practice may benefit customers and workers; it may not. But it is clearly illegal.

THE Defense. No one has considered academic collegiality in the same league as business combinations since the Sherman Anti-Trust Act was passed in 1890. Obviously education holds a special place in American society, and the pursuit of knowledge essential to a democracy has no readily tangible--or easily comparable--costs. Thus, investigated university officials say that "cooperation" in financial matters befits their high-minded enterprise, and further serves the overall public good of maintaining access to education independent of cost.

But wait. The term "unethical bidding war"--really the crux of the public-good argument--deserves a strong airing out. First assume its validity. How does the protection of undergraduate financial aid justify the possibility that schools collude in setting faculty labor costs together, a separate issue involving separate individuals? Can we contradict collusion charges when the most expensive schools jointly hike costs faster than inflation? Further, how can it be ethical to set a common price--the Ivy League schools with the exception of Cornell all cost between $19,000 and $19,500--when housing costs, facilities costs and research costs almost certainly vary? The potential for abuse goes far beyond financial aid-fixing.

Unfortunately, it's too much even to take the universities' ethical claim of avoiding a "bidding war" at face value. First use common sense. When setting financial aid packages together, the overlap group of schools is plainly more likely to decide on a lower award, not a higher one. The whole point of meeting is of course to save money.

Allow the universities' point that a bidding war would ensue if they did not set awards. If competition forced the big schools to work to entice students, smaller schools would go all out to get their students. Implicit in the colleges' argument is the assumption that education at all these schools is of equal value and hence should not be sold to the "highest bidder. Yet, in a competitive system, the same number of students would accept admission, and the rule of "need-based" aid should insure that the most money would go to the most needy students.

BUT there is another, troubling implication of the universities' practices and their defense of them. Who decides that education of a particular kind is of equal value and should not be bid for? Here is where arrogance comes in. Somehow the 23 members of the overlap group--the Northeastern elite colleges and universities--have already decided who makes up the top level of education, and how much that top education should cost. Do they then have the right to exclude other educators from their cozy arrangment? Do the 60-plus schools under investigation not become the "education establishment"? Is it not disingenuous to argue for the public good, when it is a few administrators of a few colleges deciding that good?

Perhaps these concerns are straws in the wind, another distraction from more severe pressures, more threatening problems to which the Justice Department should apply itself. But in the days when endowments like Harvard's rank alongside the holdings of America's largest corporations, and when education like politics and journalism faces questions of conflicts of interest, it is vital to find if there a clear line dividing "institutions of higher education" from "ordinary" corporations.

And the institutions of higher education so long accustomed to enshrouding themselves in the most liberal, democratic traditions, can no longer say that "more is better" when it comes to money, and yet in the next breath claim that it is not an issue necessary for discussion.