United have had a £40 million bid rejected for the England under-21 international, with Palace reportedly after a summer nearer £65m.
“It is madness, absolute madness," Parlour said told talkSPORT.
“I really like him, I think he's an excellent player and I've seen him on quite a few occasions.
“His defending is very good and he gets forward. But for £65 million, it's crazy.
“Look at those Ajax youngsters, they're only young. They've not really done anything yet. They've really shown that they can play in an Ajax shirt and have done really well in the Champions League but they're going for £70-80 million as well."