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ChristianKl comments on Separating university education from grading - Less Wrong
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That discourages students from cooperating. Students will help struggling class mates less when it's in their interests that those classmates fail the class.
That's correct. But I would argue that in many cases, we don't need students to cooperate as much as we need them to compete.
Or when groups of students work on a project together, the intensified competition could happen at the group level, like competition between companies.