A very interesting piece by Catherine Rampell prompted by a consortium of elite prep school planning to to phase out grade altogether and replace them with qualitative evaluations. The piece is really about grade compression/inflation in elite colleges. Her thesis, which, she says, game theory would predict, is that grade compression is much more pronounced at elite colleges than at non-elite colleges, because elite colleges want to make it difficult to identify their weaker students who, thereby, have a labor market advantage over students from less elite colleges by virtue of the brand; whereas less elite colleges want to make it easy to identify their stronger students who, otherwise, might be overlooked because employers (grad schools, etc) assume they are weaker.

If you’re a top-ranked school, having more “noise” in your grading system reduces the ability of potential employers (or admissions officers) to accurately judge particular students. On average, this can boost your school’s job/admissions placement rate. That’s because the impressive school name does the work of signaling a student’s abilities, rather than a more finely grained assessment of the student’s actual abilities.

By contrast, lower-ranked schools really want superstars to stand out, lest they get written off because of the less-elite brand. To be sure, students at these lesser-ranked institutions are still pressuring grades upward, but administrators know they need some segmentation at the very top.