While I agree that the process is more similar to the "real world" - the fundamental problem is that the grading is not. When you work as a team towards some go

While I agree that the process is more similar to the "real world" - the fundamental problem is that the grading is not. When you work as a team towards some goal whoever is evaluating you is doing so based on your contribution to the team. Here the fundamental scoring method is still the test, so an individual's motivation is to do better for himself; the teams success is secondary (and if the test is curved it may be non existent). Free riders aren't punished or penalized and all sorts of outside influences come in where people start trading on money/sex/favors/friendships/etc. Arguably those outside influences exist in the real world, but why create a system that explicitly has no mechanisms to counteract them? (ie. the prof says you can do anything that is legal and doesn't try to catch "cheaters")