I believe the cause of this may be the use of student evaluations. Students don't like hard professors, and give them bad evaluations. To some extent, professor's continued employment is dependent on having good evaluations. Hence, grade inflation.<p>In my personal experience, you can lose 20-30% of your evaluation based on hard grading. My reason for believing this? When I was a TA (i.e., "I don't write the tests, but I'll help you pass them"), I got typical evals of about 4.5. When I became a postdoc and started writing my own tests, my evals dropped to about 3. I don't think I became a worse teacher over the course of a single year, so I'm guessing my low evals resulted from not giving out easy tests.<p>(Not to mention several comments on the evals claimed that tests were too hard. I.e., "bad professor, highest grade on midterm was 75 out of 110!")<p>This is an agency problem which is fairly easy to solve: standardize exams and evaluate professor quality based on VAM instead of student opinion.