Where did it go wrong with our university system? One possible reason is the increasing importance of "grades" in the mind of a student, instructor, granting agency, employer, for the easy quantification it provides of a student's learning. This is problematic on so many different levels. Maybe the most important level is that education/teaching/learning is not about "to distinguish the wheat from the chaff", but actually about learning. At Guelph, our guiding principle for teaching and learning is "learner-centredness", actually a very useful guidance for developing a course (too bad students do not read this, and it is impossible to find on the UoG website).
The NYT now has a very informative, and scary, article on the obvious excesses this leads to: Unapologetic, ridiculous, retroactive (!) grade inflation that will accomplish nothing except appeasing students (and parents). The one advantage of this craziness? Summative grades will become useless, and by default we would switch to a pass/fail system without grades (or a pass system, since everybody will get an A :-). The article mentions that modified pass/fail systems are already implemented in Harvard, Stanford, Yale, and UC Berkeley. Sure, they can get away with this because they are Harvard, Stanford, Yale, and UC Berkeley, but maybe because of these grade inflation pressures we will all switch to formative assessment in a pass/fail system (we can only dream). And this means that we as teachers will have to step up our game as well, because this will have huge, but positive, implications on how and what we teach.