I'm going to ignore Malcolm's posts since they mostly read like a textbook article on logic fallacies.
Stepping back, it's interesting to examine exactly what we want out of an educational system. Ensuring that top-rate talent gets the very best teaching possible is one thing. Training people for their chosen vocation is another. Making sure that every member of society has at least the basics to understand current events and how to make informed decisions about their lives is a third. The last is what's currently emphasised, and there are good reasons why, many of whom have little to do directly with education.
Starting in the middle, let's assume that schools only taught the very essentials necessary for whatever you chose to do, or tested best for on some aptitude test. What this does is pigeon-hole people, effectively making it harder to switch profession. This might have served well in the middle ages, when you'd send apprentices off for a decade of highly specialised training (mixed with a healthy dollop of mind-numbing unskilled work - why do I get the idea this is MK's preferred schooling system?). Works well, produces skilled professionals - but only as long as the job market and technology is unchanging. In today's society, people are often required to change careers altogether, which would be much more difficult in such a system. Add institutional classism to the mix, and you have pretty much a caste system in the making.
The same objections also apply to the first choice, although to a lesser degree. What about the third then? Well, aside from giving people a general set of knowledge to base choices on, we also would like them to know how to think. The very principles of reasoning is actually the greatest difference between our society and, say, the 18th century - people are not necessarily smarter, but we know very well how to counteract our own biases, construct and use logical arguments. The fact is that the current school system isn't only providing general-purpose education, but more important are the techniques of how to think. This holds true even as far as university level.
http://www.ted.com/talks/james_flynn_why_our_iq_levels_are_higher_than_our_grandparents.html
A second benefit of a general-purpose, one-size-fits-all education system is to reduce class differences in society. This provides vertical mobility and also improves trust - if you've played football with your trailer-park neighbour, it gets more difficult to see them as subhuman. And trust is a much neglected factor in improving the economy; indeed, most everyday dealings require a certain amount of trust that you're not going to get tricked. Every effort spent to insure against that risk reduces the effective operation of the economy.
Thirdly, providing a relatively equal education to all levels of society strengthens the democratic process by making voters more informed and better able to elect representatives and hold them accountable (grant you, that may or may not be the objective of whoever is running the education board).
Now, to provide an example of a place where this is running effectively, look at Finland, who have been a shining example of (government-run) education for a number of years. Their main objective was actually to improve equity, i.e. make sure that all schools provided an equal level of education. A surprise side benefit of this effort is that not only is the basic metrics such as literacy outstanding, but the top-level graduates are more capable as well.
One thing I'd like to point out when it comes to equity, is that having to choose a school for your children is one of the most difficult and unnecessary choices we face today. Why should it matter what school I choose? What benefit does facing this choice provide to society? And even if I distrust the local choices available, how does
resigning from the workforce and
assigning their education to an individual with no training in teaching (me) benefit either my children or society?