Grading (which I'll call marking for the rest of this comment) has three purposes, and you've only described one -- motivation. The second is to let third parti

Grading (which I'll call marking for the rest of this comment) has three purposes, and you've only described one -- motivation. The second is to let third parties (parents, universities, potential employers) know how well a student has done. The third is the most important: low grades. If a student does poorly then it lets everyone (the student, the teacher, and potentially the parents etc) know that something is wrong. Maybe the student hasn't been working hard enough, or maybe the student has misunderstood some key concept, but getting feedback when your work is bad is vitally important. Doesn't matter much when you're a bunch of five-year-olds studying ancient Egyptians, but if you're studying stuff you actually need to know then you need to know whether you in fact do know it.