The economist Milton Friedman taught that superior products flourished and shabby ones died out when consumers voted emphatically with their dollars. But the truth of the marketplace is that shabby products can do just fine if they sustain the veneer of quality while slipping downhill, as has much of higher education. Faced with demanding consumers and stiff competition, colleges have simply issued more and more A's, stoking grade inflation and devaluing degrees.

Grade inflation is in full gallop at every level, from struggling community institutions to the elites of the Ivy League. In some cases, campuswide averages have crept up from a C just 10 years ago to B-plus today.

Some departments shower students with A's to fill poorly attended courses that might otherwise be canceled. Individual professors inflate grades after consumer-conscious administrators hound them into it. Professors at every level inflate to escape negative evaluations by students, whose opinions now figure in tenure and promotion decisions.

The most vulnerable teachers are the part-timers who have no job security and who now teach more than half of all college courses. Writing in the last issue of the journal Academe, two part-timers suggest that students routinely corner adjuncts, threatening to complain if they do not turn C's into A's. An Ivy League professor said recently that if tenure disappeared, universities would be ''free to sell diplomas outright.''