Incentives matter: education file (updated)

The Press is reporting that

Students' poor grades will hit university bank balances under sweeping Government changes

Tertiary Education Minister Anne Tolley yesterday released the Tertiary Education Strategy 2010-2015.

Tertiary institution funding will be linked to performance, the strategy says.

Initially, this will focus on student results.

Easy answer to getting lots of money, give everybody an A+! Grade inflation on speed.

Update: Eric Crampton notes that the only answer to the grade inflation he can think of is moving back to the old system of purely external assessment, with all papers being (set and) graded offshore. Imagine the cost! But even this may not be perfect, if we get to pick the external examiners then we will pick a few mates who will give the grades we want. Eric also points out that,

The Press article notes that while funding will initially be linked to student results, it'll eventually move to being linked to graduates' eventual jobs. I wonder how they'll track that. We don't even know where most of our undergrads wind up. What do they do with the large chunk of students who head overseas for their OE after finishing University?

This could all prove interesting. If it's the simple "first grades, then whether employed (or salary on employment)", the equilibrium is grade inflation plus refusing admission to anyone with a poor statistical chance of achieving decent employment outcomes.