Many young people take "Mickey Mouse" degrees only to see little or no financial reward, it is claimed.
Britain currently produces fewer graduates in law, science, mathematics and health than most other developed nations, but more teenagers study humanities and the arts, said the report.
It comes despite the fact that British students taking these courses gain the least financial benefit. They add no more than £51,500 to a graduate's lifetime earnings, the study said, compared to £340,000 for those taking medicine.
Researchers blamed an over-bureaucratic education system - coupled with more "teaching to the test" at schools - which meant many teenagers were too reliant on tutors, teachers, careers advisors and Government recommendations to get along.
"Removing individual involvement and decisions from the process has the danger of undermining the values of successful education - personal discipline, curiosity, independence of thought and hard work," said the report.
The study called for a dismantling of the "education maze" which has seen post-18 policy dictated by 29 quangos and 101 different large-scale initiatives in recent years.
It said the £9.6 billion currently spent teaching 18 to 21-year-olds should be used to create so-called "individual education accounts" worth £13,000 for all young people.
More on the report produced by Reform should be here later today - if you can't find it then I have a copy I can send you.