North Coast Journal

Jan. 1995

What price Self-esteem?

by Ron Ross

The word "inflation" usually refers to money. Recently, we've seen another form of inflation - grade inflation.

Like monetary inflation, grade inflation does widespread damage, but in subtle, hidden ways. Both kinds of inflation tempt people to believe they are getting something for nothing.

"Too much money chasing too few goods" is the best, concise description of the process of monetary inflation. The most common situation where "too much money" gets created is when a government wants to spend more than it has the capacity to derive from taxes and borrowing.

There are no practical limits to how much fiat, or paper, money can be expended. The monetary authorities could, for example, tell all the banks to add three zeroes to all checking accounts. (In this country, checking accounts comprise about three-fourths of our money supply.) That effectively would balloon the money supply almost a thousand times.

Most people would have more money, but unfortunately they would not be wealthier, at least not for long. As the vastly larger money supply chased the same quantity of goods and services, there would be severe shortages and hyperinflation. Demand would overwhelm supply, and prices would have to rise - otherwise, severe shortages would result. Prices would be about a thousand times higher than what they had been.

Today it's common to see two-thirds of the students in a school make the honor roll. A few decades ago, the typical number making the honor roll was closer to 10 percent. In many schools today, A grades are more common than C grades.

Teachers inflate grades for several reasons. Perhaps the foremost is for the hope of increasing "self-esteem." We want students to like themselves and to believe they are competent, so why not give them an A rather than C? Or a C rather than an F?

With all the grade inflation we've had over the past several years, by now we should have seen a dramatic increase in self-esteem. But I've heard no one claim self-esteem is higher than it was before the grade inflation.

Of course, when you think about it, that's not too surprising. Inflating grades ultimately does no more good than inflating a currency: It's easy, but it just cancels itself out. But often it's worse than that, and we end up in poorer shape than when we started. A wholesale lowering of standards is an unlikely route to improvement.

Inflation, especially severe inflation, diminishes the valuable information inherent in a price system. An effective price system conveys enormous amounts of useful information about relative costs to participants and decision makers in an economy. How should you allocate your expenditures? What combination of resources should a business use in producing its products? What occupation should you choose? The price system is the language an economy uses to communicate with the participants.

Grade inflation destroys the information inherent in a grading system. It debases the currency. When most students get A's and B's, those grades don't mean much.

Students aren't fools. They recognize what's happening. They know the "currency" has been debased, so getting "good grades" does little or nothing to increase their self-esteem (or chances to enter good colleges or graduate schools). An A grade ceases being much of a reward or incentive for hard work.

Grades give students feedback. Grades tell them how they are doing relative to part of their environment. Grades are far from being a perfect measure, even in the best of circumstances; in fact, finding that out is a valuable part of the learning process. Inflating grades sugarcoats reality, and is ultimately dishonest.

If we decide we don't want to rank students, or have them compete against one another, we should do away with the grading system. As it is, we're only pretending to grade.

Grade inflation does appear to be effective in regard to parents. When a child makes the honor roll, the parents tends to believe not only that their children are doing well, but also that the school is doing well. The school system effectively dodges a lot of criticism by inflating grades.

Schools pass out bumper stickers proclaiming "My child made the Honor Roll at Gracie Allen Middle School."

Is there honor in merely being above average? It's an honor without profit, a difference without distinction. Someday maybe we'll see grade deflation, and the earning of an A will again generate a true sense of accomplishment.

Ron Ross is a financial planner with Premier Financial Group, Eureka.

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