Outside Edge: An easy answer to grade inflation

The news that Cambridge university is to demand A* rather than A grades at A-level has provoked yet another frenzy of concern about grade inflation – the name normally given to the process by which C grades become B grades and then A grades and, before you know it, all shall have prizes.

Grade inflation, like real inflation, seems widespread, afflicting not just UK schools but the Ivy League. Stuart Rojstaczer, who maintains GradeInflation.com, reckons that grades at US private universities have risen from an average of 2.3 out of 4.0 in the 1930s to 3.3 today. That rate of inflation, by itself, would be manageable – 22-year-olds do not need to compare grades with 92-year-olds. (Grade hyperinflation would be another matter entirely: students would have to take examinations, be awarded marks and then apply for jobs or university places within a matter of hours, before their grades were devalued.)

Alas, grade inflation is a misnomer. True grade inflation would mean each grade was equally devalued, with A grades superseded by AA, AAA and AAAA as new labels for superlative performance became necessary. One hundred per cent would become 110 per cent.

Yet examiners are reluctant to award 110 per cent and there are no AAAA grades. What we see is not inflation but a classic price distortion. Eventually all students will get A grades and they will be meaningless. A* grades are a small, belated step in the right direction.

Grade distortion is a serious affair. Students and their teachers are forced to switch to grey market transactions denominated in alternative currencies: the letter of recommendation, for example. Like most alternative currencies, these are a hassle.

Grade distortions, like price distortions, destroy information and oblige people to look in strange places for some signal amid the noise. Students are judged not on their strongest subjects – A grade, of course – but on whether they also picked up A grades in their weakest. When excellence cannot be displayed, plaudits go instead to those who deliver pat answers without stumbling – politicians in training, presumably.

The obvious solution to grade distortion is to ration grades so that no matter whether standards are high or low, only the better students can receive the top grades. Unfortunately, like any competitive system, such policies can create ill-feeling towards high-flyers, and even sabotage.

If grade rationing is unacceptable, perhaps grade distortion should be replaced with true grade inflation, freeing grades from the worldly confines of a maximum 100 per cent or A*. As long as everyone understands the game, what harm if the typical student of tomorrow is awarded an AAA grade? The rating agencies might even find a new line of business here – handing out an AAA for nicely packaged dross is something they should be able to master.

Tim Harford’s blog

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Tim, also known as the Undercover Economist, writes about the economics of everyday life.