> The average mark is generally fixed at around 75%
You just made that up.
> So a professor that systematically inflates grades will be called out.
Yyyyyyyeaaaahh...where?
From experience, the average mark given to Harvard humanities undergraduates is an A regardless of quality. Students literally cry in the middle of class if they get an A- because they can't string together a coherent argument from evidence.
> Perhaps universities like harvard have lower standards.
Believe me, I'll be first in line to shame their academic standards. However...
> In any case, consider that this system is in fact a solution to the proposed problem.
It might. I think that it creates other sinister problems in the process. You have to ask whether you think that the purpose of going to school is to better yourself versus competing against your neighbors. If a person does poorly in class because of someone else's performance, that's pretty fucked up. Likewise, if someone does well in class because of someone else's performance, that's also fucked up. The system you appear to be describing perversely encourages sabotage and cheating, because learning is secondary to "winning", because you're fucked by other people succeeding. My intuition is that systems that treat grades like a competition produce a combination of accidental failures and assholes who treat other people poorly.
>the purpose of going to school is to better yourself versus competing against your neighbors
It must be both. In order to better yourself, you must challenge yourself. Your peers have similar capabilities to you, because you both met roughly the same standard in order to get into the school you got into, as opposed to a better or worse one. Competing with them will therefore be challenging, but not too challenging.
Note that I don't propose the average is set at precisely 75%, nor that professors change the weights after the fact to make it so. Just that when they are setting the course - choosing what material to cover, what to leave out, setting the exam - they bear in mind the aptitudes of their students and choose appropriately. If the grades come in too high, meaning the students found it too easy, they might in future terms increase the pace or the difficulty of questions to compensate. This means that as a student you aren't competing with your class, but rather with the body of students that came before. In turn, you gain nothing from doing poorly, because you will still be awarded a proportionately low grade, and only make the course easier for future students.
Why this isn't implemented at the schools you attended I could only guess, but perhaps these schools historically determined standard based on more objective criteria, and have ceased doing so more recently without replacing their system for determining standards.
The reasoning provided here is exactly why we often explicitly told students that they were not graded on a normal distribution. I was told that, historically, when students were graded on a normal distribution, it typically led to bimodal distributions of grades - a few students continued to try, but most were convinced that if they all did poorly then they would all still do fine, and so they just tried to be "good enough" and chance it. By the time I was teaching it was simply departmental policy not to grade this way.
Even without this historical evidence, however, it does seem unfair to grade this way for exactly the reasons in BugsJustFindMe's response. It might make sense in larger first-year classes, but in the more advanced smaller classes (say, 30 students) it's likely that you're already down to a set of students who try really hard and potentially all deserve an A. There's a lot of correlation between (perceived) difficulty of the course material and the students who take the class, so there's no reason to expect that you have the same distribution of students from those beginning first-year courses in your "Advanced Stochastic Processes" course.
You just made that up.
> So a professor that systematically inflates grades will be called out.
Yyyyyyyeaaaahh...where?
From experience, the average mark given to Harvard humanities undergraduates is an A regardless of quality. Students literally cry in the middle of class if they get an A- because they can't string together a coherent argument from evidence.