Inside Higher Ed recently carried a learned piece entitled "Grade Inflation: An Ahistorical Narrative."* After pointing to the interesting fact that back in the day (19th century), grades as we know them did not exist, the authors agree that grade inflation - starting in the 1960s - is real. But the piece never gets to the cause. And the cause is not hard to discern.
During the 1960s, and especially in the decade that followed, students - as a consequence of the protests back then - were given the opportunity to rate their professors and those ratings began to matter in the promotion process.
Unhappy students were able to create unhappy consequences for professors. That change created the incentive system that led to the outcome.
When prices inflate, there is always a higher price available. Thus, something that cost $10 could later cost $12, then $14, etc. There is, unfortunately, no letter before "A" and so eventually grades stop going up and all become A. Unlike uncapped price inflation, relativity disappears under a regime of grade inflation. Grade inflation stops when everyone hits the cap. While one good can always be more expensive than another, nobody's A is better than anyone else's A. If you don't like that outcome, you need to change the incentive system. Some academic departments do so by requiring grading on a curve and (presumably) penalizing faculty who deviate.
There are obvious problems with grading on a curve, particularly in small classes, but no incentive system is perfect. The true ahistorical lesson is that people, even faculty (!), respond to incentives. It has always been true. It will always be true.
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