This is exactly what we think is a fairly common attitude -- thanks for stating it so clearly! It has ramifications both within a single class and when you think about how prerequisite and dependent classes are structured.
How do you think it could be done differently? Student need to be judged for who moves ahead. That is, I have people in Calc I and I have to decide who moves on to Calc II. I can't send the next instructor a poset of their competence. I cannot require that everyone be competent at everything. I wonder what is your proposal?