From A Place for Everything, by Judith Flanders (Basic Books, 2020), Kindle pp. 226-227:
For Panizzi, and the British Museum, alphabetical order was seen as a pragmatic, modern solution—in fact it was the pragmatic, modern solution.
These questions arose in American university libraries just as the institutions themselves were moving toward a grading system that used the alphabet. Yet universities had not naturally been a home to ordering by alphabet more generally. Even in the New World, supposedly freed from old caste systems by its revolution, society continued to be viewed hierarchically: the earliest surviving lists of students at Harvard and Yale Colleges show them ranked not according to their own merits, by examination results or by their conduct, but by their families’ social status. It was not until 1886 that Yale began to list graduating students in alphabetical order.
At the same time, many colleges had used descriptive phrases to indicate pass or fail marks. In the late eighteenth century, Yale had used “Optimi,” best; “second Optimi,” second best; “Inferiores (Boni),” lower (good); and “Pejores,” worse. In the nineteenth century this was replaced by a scale of 1 to 4. Harvard, on the other hand, switched from numbers to letter grades in descending order from A to C just as it was adopting an alphabetically ordered card catalog. The University of Michigan initially simplified its system to pass or fail, later replaced with P for passed, C for “conditioned” (presumably some form of conditional passing grade), and A for absent. Mount Holyoke, in Massachusetts, founded in 1837 as the Mount Holyoke Female Seminary, used A for excellent, B for good, C, fair, D, passed (“barely”), E for failed, before changing to pass grades A to E, with F becoming the new “failed.” With none of these changes does there appear to have been any discussion as to why A was almost always the best—it just seemed obvious that it was.
I don’t remember what grading system we used when my wife and I taught English in Zhongshan, China, in 1987-88, but I remember writing 努力 ‘works hard’ next to a few of the student names in the roster. The hardest workers tended to be students who didn’t have relatives in Honolulu, San Francisco, Vancouver, or Sydney who sent them allowances in hard currency that exceeded the value of the renmenbi we were paid each month. In any case, the grades we assigned didn’t matter. The graduates who got the best jobs were the ones who looked most attractive and/or had the richest parents.