There's some really interesting stuff being written in this thread. As a skier/customer and not an instructor or industry employee, I'm a bit hesitant to jump in, but...
I do somewhat question the characterization of certain lessons as "loss leaders". The hourly rate of a ski instructor is notoriously low and the marginal overhead involved in having an additional instructor teach an additional lesson is very low.
It wasn't too long ago that the cost of a private lesson was split 50-50 between the instructor and the school. Since then, the instructor's pay has stayed pretty much constant and the school's take has multiplied. As far as I can tell, there's either too much profit or too much bloat in ski schools.
I do agree, however, that private lessons are a premium product and middle-class skiers should be able to learn just fine without them. I think they should be cheaper than they are now and the low prices should extend all the way up the ability scale.
I'm going to have to second 4ster's suggestion: half the cost; double the pay. It's not just that, though. There needs to be greater outreach, advertising, marketing packages, incentives, etc. More, younger and more-skilled participants aren't just a feel-good outcome, they're what'll keep the bottom from dropping out of the business model. Tackle that, and all that's left is climate change to worry about.
I wonder: is there any way to influence an American business to focus 20 or 50 years down the line?