Grade inflation is a problem for several reasons. First, as GPAs increasingly get compressed into the 3s, the amount of information they contain within a given number of decimal points decreases. Second, the problem is exacerbated by the tendency for different academic departments to exhibit different rates of grade inflation. Third, negative externalities are clearly not being internalized. When the grades of lower-caliber students get inflated, it makes them appear similar to higher-caliber students. And since high grades are popular, professors who give high grades have fewer headaches relative to professors who are trying to stem the grade inflation tide. I have a simple solution for grade inflation. It’s a little radical, but I offer it in complete seriousness.

Grades and GPAs are a method of ranking performance. They are not a particularly good method of ranking, because giving one person a higher grade (or rank) does not immediately entail lowering the grade (or rank) of another person. This is the source of the externality problem. Fortunately, a better ranking system is already in use by another dimension of college life, NCAA basketball.

The system is called the Ratings Percentage Index, or RPI. You can find the latest RPI rankings here. The system works as follows. Every day, each team’s winning percentage (WP) is calculated. Then, each team’s opponents' winning percentage (OWP) is averaged. Then each team’s opponents' opponents' winning percentage (OOWP) is averaged. The RPI is then a simple weighted sum: RPI = (WP × 0.25) + (OWP × 0.50) + (OOWP × 0.25).

How can we adapt a system based on wins and losses to a classroom setting, where “games” are exams, papers, and so on? The answer is surprisingly simple. At the end of every semester, instead of submitting grades to the registrar, the professor will submit an ordinal ranking of students. For each pair of students, being ranked more highly counts as a win, being ranked lower counts as a loss. Suppose there is a class with 25 students. In effect, every student is playing 24 pairwise games. The top student in the class is 24-0, the second student is 23-1, and so on. The worst student is 0-24. If a student takes three such classes and ranks first, third, and fifth for the semester, her record will be 66-6. Her winning percentage will be 91.7.

This already goes a long way toward curbing grade inflation. Professors won’t feel pressured to give high grades because they can’t give universally high grades. They can rank students. Ranking one student more highly will cause another student to rank lower. But the real benefit of the system comes from the other components of the RPI.

Under the current system, a student can earn a high GPA by taking only very easy classes. With an RPI system, classes won’t be easy in the sense of offering high average grades, but they may still attract inferior students. For instance, the reality of college education is that engineering classes attract more talented students than education classes. If you wanted to boost your winning percentage, you could do so by taking a lot of education classes. However, the other components of the RPI account for this. If you take only classes with less talented classmates, your OWP and OOWP will be very low, as long as there is not complete separation of students between programs (we should expect this—if a school is running two distinct programs, then it naturally ought to have two separate ranking systems).

One way to ensure that there is not complete separation is to require an extensive general education curriculum. But even if this is not present, the system incentivizes integration between programs. If a student in an easy major wishes to improve her rank, she will have to take difficult electives and work very hard to beat out the students who are more talented than those with whom she is used to competing. Contrast this to the GPA system. If a student in an easy major wishes to improve her GPA, her incentive is to take easy electives, probably in her major area.

Another advantage to the RPI system is that it solves the first mover problem. If a school wishes to combat grade inflation within the current GPA system, it will need either to do it in coordination with other schools or to subject its students to a disadvantage as the seriousness of its fight against grade inflation only gradually becomes apparent (in this latter respect, it is similar to the problem faced by the central bankers of countries that suffer from monetary inflation). But switching to the RPI system is immediately credible. The old scale is not comparable, and most of the externalities are internalized. A school that switched to the RPI system would only disadvantage its students insofar as they would have to explain the system to people who had never heard of it.

Obviously, any system can be gamed. This one is no exception. Nevertheless, I think it is a clear improvement over the GPA system. I hope that in spite of its radicalness, it will garner some consideration from the people who control such things.