Grades are not prices

In a recent EconTalk episode, Daisy Christodoulou explored the challenges of educational assessment, drawing provocative parallels between grades and prices. She suggested that grades, like prices in a market, help allocate attention, shape incentives, and guide decisions. It’s a striking analogy—and one that resonates with the broader themes of the episode, which reflected deeply on tradeoffs, transparency, and the limitations of rule-based systems. But as I sat with the idea, I found myself questioning whether the price metaphor truly captures what grades are—or what we need them to be. This essay is a reflection on that metaphor, and an argument for thinking about grades and educational feedback in a different way.

Christodoulou suggested that grades function as the price mechanism of education. The idea is compelling at first glance. Like prices in markets, grades – supposedly – help allocate attention, shape incentives, and signal value. But the more I thought about it, the more the analogy began to unravel.

When we talk about prices, we’re referring to a very specific kind of signal. A price emerges from voluntary exchanges in a market and reflects, however imperfectly, something about collective valuation. It communicates scarcity, prioritization, and tradeoffs. Prices work because people can interpret them in context. If apples are more expensive than bananas, I can make a decision about what to buy based on what I need, what I like, and what I can afford.

Grades, though, don’t really operate that way. They’re not set through decentralized negotiation. They don’t emerge from collective judgment. And they don’t carry much embedded information about how much effort something is worth, or whether what’s being asked of the student is truly valuable in a broader sense. A grade is, at most, a signal about how well a student conformed to a particular expectation. But whether that expectation is aligned with long-term understanding, relevance, or personal growth is often an open question.

This is especially true when students are unclear on what’s being asked, or when the effort required to earn a grade is uncertain. The relationship between effort and outcome is often opaque. A student may work hard and receive a low grade, or may exert minimal effort and do quite well. In this context, grades do little to help students decide where to allocate their energy or attention – unless their sole goal is to chase the grade itself.

Of course, we need structure in education. We need feedback. And grades do serve a role. But we need to be clearer about what that role is – and more importantly, what it isn’t.

To that end, I find it more helpful to think of grades – and assessment more broadly – through a different analogy: fitness training.

People who are working to improve their fitness rely on a wide range of metrics: the number of miles they can run, the pace they can hold, the weight they can lift, the number of reps, or how many rounds they can complete in a circuit. These are all measures that people track over time to mark progress. But crucially, they are not necessarily meaningful goals in themselves – they are only in a certain context, and taken all together. A person doesn’t want to run a six-minute mile or deadlift 225 pounds for the sake of those numbers. They want to become faster, stronger, or healthier. The numbers are useful only insofar as they help someone understand their trajectory and their goals.

And people who train seriously understand this. They don’t rely on a single metric. They take multiple forms of feedback and interpret them together. They adjust their routines. They reflect on their performance. They don’t confuse the metric with the outcome they care about.

Here’s another interesting observation – there isn’t really a big market for fake weights. People who are training are not really interested in kidding themselves into thinking they can lift more than they can. They are not really interested in buying stopwatches that run slower, so they can say they run faster. This is not only because they are intrinsically motivated. It is because fooling yourself doesn’t help you reach your goals. It makes it harder, because you’re not really sure how well you are doing, and where you can improve.

One of these days, lying to yourself will catch up to you. So why bother doing it?

On the other hand, most people don’t feel that bad when they get an “A,” regardless of what that means. Even if they don’t put in a ton of work, they still want good grades. I think it’s because they can’t really tie these grades to real life outcomes. Since that is so hazy, we might as well fool ourselves and others into thinking we are very capable, even if we are not. Because students have difficulty making the link (and making that link to possible evaluators or future employers), there isn’t really any check on minimizing grade inflation.

To me, fitness is a much more honest and useful analogy for education and grades. Like fitness, learning is complex. The outcomes we seek – understanding, capability, fluency, adaptability – can’t be fully captured by one number or letter. We need to give learners multiple forms of feedback, and we need to help them develop the ability to make sense of those signals for themselves.

What ultimately distinguishes an advanced learner is not just their ability to complete the assigned tasks or follow a given curriculum. It’s their ability to interpret what they’re doing in light of their own goals. It’s their ability to refine, to recalibrate, and to take ownership of their learning. In fitness terms, it’s the difference between someone who can complete a workout as prescribed and someone who understands what that workout is doing for them – who can design, adapt, and assess their own plan.

This kind of learner doesn’t just accumulate grades. They build the capacity to make meaningful, self-aware progress. They don’t ask only “What do I need to do to get an A?” They ask “What do I want to know? What’s worth learning? And how do I know whether I’m getting better at it?”

That’s the real work of education – not just the transmission of content nor merely measuring the fidelity of that transmission (grades), but the development of that internal compass. And it’s not just about intrinsic versus extrinsic motivation either. It’s about cultivating the judgment to interpret feedback, align learning with purpose, and track progress in a way that makes sense to the learner. Grades might have a role to play in that process, but only if they are framed carefully, honestly, and with an emphasis on helping students develop that deeper sense of where they’re going and why.

If grades could act like prices, it still wouldn’t coordinate a learner to make good decisions – not without a broader sense of goals and a notion of how such goals reflect progress toward achieving them. This isn’t intrinsic motivation – it’s extrinsic, goal-oriented behavior; it just embraces the idea that goals and pathways are informed by signals, but these signals need to be interpreted.

In the end, a great educational experience should leave a student with more than a transcript. It should leave them with the ability to navigate, to adapt, and to keep learning. It should help them understand how to make meaning of grades, how to find other signals, and how to use all this information to chart a path, one that requires recalibration along the way.