This article, which cites Daniel Pink, is a great article about how difficult it is to retain innovators, because if rewarded fairly, it’s not about the money for these people. They are driven by autonomy, purpose, and mastery.
The same with students. For far too long schools have been giving higher grades for compliancy, not necessarily aptitude or mastery in a subject. In this nytimes article: A’s for Good Behavior, it goes on to say that for far too long, the ‘good student’ who did their homework, their extra-credit work, etc. got the A. Many who could demonstrate mastery received lower grades. There are many grade-less schools out there as models. Are there any test-less ones?
Both these articles describe what’s wrong with the old business approach of carrot and stick. In the first article, they don’t need carrots or sticks, they need something to keep them going. In the second article, the letter grade is the carrot (or stick) – it’s meant to keep management happy, not necessarily those who are being managed.