[goblgobl]

Grades have this affect because they become psychologically tied to your self-worth. Where does it start? I don't think small children care or are even aware of the significance of having good grades (what 5-8yr old is gunning for Harvard?), but they can certainly sense which end of the spectrum is desirable if they seek to maximize love, affection, and acceptance from adults and peers.

You take the organic process of knowledge acquisition and now you've added game mechanics to it. For children the prize is acceptance, and for college students its social status, employment prospects, and respect. Now you have scores and outcomes, and critically, the outcomes do not have to be tied to any intrinsic motivation for the thing you are trying to learn.

So children might do things not because they're interested in them, but because it makes them look smart. People will chase lucrative jobs in fields they don't particularly care for, or want to join particular institutions just for the prestige, and a wide range of other behavior thats driven by rewards of performance and not of one's real interests. Learning for learnings sake takes a back seat to all of this.