The problem is the alternative option is worse.

Tenure provides stability to an elite group of intellectuals, who enjoy enourmous freedom of creativity. They serve a number of fundamental functions: innovation, education, to name a few. The system has limitation, but the alternative option is worse. Think about that, when every professor has to fight for the next year's contract renewal, what will happen. Give the smartest people some freedom, even only 1% will come up with good ideas, the money is well spent.

Disclaimer: I am a tenured professor.