Personally, I am very much against grade inflation. I had a 3.4 coming out of Wash U. and I deserved every A and B that I got in my time there. I reject the argument that I would have gotten better grades at another school. Is it potentially true? Yes. But, it is immaterial. My diploma says Washington University in St. Louis. I don't have a good answer for you. Is it, "unfair" if students who WOULD get better grades at other schools are discriminated against because of their undergrad? Yes. By the same token, it is a student's choice as to what school they go to. We can have an endless debate about whether a 17 year old picking schools could possibly understand the ramifications of their college choice, but to me a school sets it's policies and its grading and it should be up to us as adcoms to understand the basics of what schools do. Will we ever know the full picture? Doubtful, but to me that is where the burden should lie. To be honest, it DOES happen. There is no way to accurately 'smooth out' grading across the country, so I don't think that people should try. I would also argue that what major you are in and your course load will impact your GPA just as much or more than the school that you are at. More complexity that should really not be touched with a ten foot pole as far as compensation.
My primary issue was with the concept of "deserving" a spot in a medical school class. Personally, I think that academics are a very poor way of picking between medical students. After living in the hospital for the better part of the last 5 years, I am thoroughly convinced that a 3.9 student on average has no better chance of being a good doctor than a 3.6 student. Are they more likely to survive the training? Absolutely. Are they more likely to do well on their steps and shelves? I think you can make a compelling argument. But, better physician? I don't think so. Every school in the US can fill their classes with extremely good students, there are plenty of high GPA/MCAT students to go around. What else do people bring to the table? I don't think that people with a 3.7 are innately better than a 3.3 or more likely to be a better physician. If that 3.3 brings something to the table that is unique or better than the 3.7, I'm more interested in interviewing them.