A recent NY Times article laments the fact that students these days have come to expect an A for effort.
Thinking about it, I'm actually ok with the idea of A for effort (there's the Marxist in me again), Assuming of course we could measure effort accurately, and they really put in sufficient effort. From a contract theory point of view, arguably grades are designed just to incentivize effort, and if they really put in maximum effort then an A makes sense.
Also, from a Rawlsian distributive justice point of view, it also makes sense. There's an interesting paper by John Roemer on how in a fair Rawlsian economy wages should be based only on effort. and things like innate ability and privleged background should all be subtracted out.
The only reason not to give the A for effort is if we believe our job is to provide accurate signals for employers or if it would be unfair to other students. Though perhaps the ability to put in effort is the only dimension that employers really care about. That is far more useful to them, than the ability to write essays about the fall of carthage or to derive Legrangians for maximization problems. There is evidence (that gladwell for example popularizes in his latest book) that innate ability doesn't matter too much, and that people we call geniuses like Mozart, are people who just had a low cost of effort. They only became geniuses after 10 years of hard effort and practice.