A solution to grade inflation?

In the somewhat limited teaching experience I've had, I have found grading to be particularly difficult. The grade a student receives in my class can determine whether he'll get or keep scholarships and will play a role in determining what kinds of opportunities he'll have after my class. This is a huge responsibility. As a psychophysicist, I worry about my grade-regrade reliability (will I grade the same paper the same way twice), order effects in my grading (if I read a particularly good paper, do all papers after it seem to not measure up?), and whether personal bias is affecting my scoring (Sally is always attentive and asks good questions in class, while Jane, if present, is pugnacious and disruptive).

Of course, the easiest thing is to give everyone generally good grades. The students won't argue that they don't deserve them, and in fact, there is evidence that they'll evaluate me better for it in the end.

And while many institutions have (implicitly or explicitly) adopted this strategy, the problem with grade inflation is that it hurts students who are performing at the top level, and removes accountability from our educational system. So, what do we do about grading?

The Chronicle of Higher Education has an interesting article showing two possible solutions. The second solution involves AI-based grading, which sounds intriguing. Unfortunately, no details were provided for how (or how well) it works, so I remain skeptical. However, the first proposed solution merits some discussion: outsource grading to adjunct professors who are independent of the course, professor and students. The article follows an online university that has enacted this strategy.

Pros of this idea:
- As the grader is not attached to either the professor or the student, bias based on personal feelings towards a student can be eliminated.
- In this instantiation, graders are required to submit detailed justifications for their grades, are provided extensive training and are periodically calibrated for consistency. This can provide far more objective grading than what we do in the traditional classroom.

However, the idea is not perfect. Here are some cons that I see:
- The graders' grades get translated into pass or fail. A pass/fail system does not encourage excellence, original thinking, or going beyond the material given.
- Much of traditional grading is based on improvement and growth over a semester, and this is necessarily absent in this system. Honestly, I only passed the second semester of introductory chemistry in college (after failing the first test) because the professor made an agreement with me that if I improved on subsequent tests, she would drop the first grade.
- Similarly, the relationship between professor and student is made personal through individualized feedback on assignments. Outsourcing grading means that there cannot be a deep, intellectual relationship between parties, which I believe is essential to learning and personal growth.

While not perfect, this is an interesting idea. What are your ideas for improving on it (or grading in general)?