Nominal and real variables: academic edition

Writes the New York Times:

One day next month every student at Loyola Law School Los Angeles will awake to a higher grade point average.

But it’s not because they are all working harder.

The school is retroactively inflating its grades, tacking on 0.333 to every grade recorded in the last few years. The goal is to make its students look more attractive in a competitive job market.

My macro is rusty. But I'd thought that inflating the money supply to increase output only worked if it were a surprise. If it's a surprise, everyone takes an unexpected wage cut and employment goes up until folks incorporate the inflationary shock into wage settlements. But if it's entirely telegraphed in advance, folks just adjust their expectations.

While a Doomsday Device only really works if you do tell everyone about it, inflation, monetary or otherwise, only works if you don't and only until folks figure it out. So why would Loyola be telling everyone? Ah, there's a reason:

Students and faculty say they are merely trying to stay competitive with their peer schools, which have more merciful grading curves. Loyola, for example, had a mean first-year grade of 2.667; the norm for other accredited California schools is generally a 3.0 or higher.

“That put our students at an unfair disadvantage, especially if you factor in the current economic environment,” says Samuel Liu, 26, president of the school’s Student Bar Association and the leader of the grading change efforts. He also says many Loyola students are ineligible for coveted clerkships that have strict G.P.A. cutoffs.

“We just wanted to match what other schools that are comparably ranked were already doing,” he said.

So Loyola wants employers not to have unrealistic expectations about changes in cohort quality over time, but wants its students not to be at disadvantage given their {stricter standards or worse students}.

Strict GPA scholarship cutoffs are nonsense if they're not adjusted for the school's average GPA and the school's average LSAT scores: they only promote exactly this kind of grade inflation. But it would be difficult to get schools truthfully to reveal that information.