The authors of the paper, Philip Babcock and Mindy Marks consider a number of possible reasons for this decline all of which are plausible, but there are a couple of reasons, one they discuss and one they don't, that I think are surely among the top three or four factors exerting the most influence on students' study habits. Babcock and Marks say this about the first of these:
"A nonaggression pact exists between many faculty members and students: Because the former believe that they must spend most of their time doing research and the latter often prefer to pass their time having fun, a mutual nonaggression pact occurs with each side agreeing not to impinge on the other." Consistent with this explanation, recent evidence suggests that student evaluations of instructors (which exploded in popularity in the 1960s and 1970s) create perverse incentives: "easier" instructors receive higher student evaluations, and a given instructor in a given course receives higher ratings during terms when he or she requires less or grades more leniently. Because students appear to put in less effort when grading is more lenient, grade inflation may have contributed to the decline. Perhaps it is not surprising that effort standards have fallen. We are hard-pressed to name any reliable, noninternal reward that instructors receive for maintaining high standards--and the penalties for doing so are clear.
I think the fear of a bad evaluation by students is one of the chief forces causing instructors to be less demanding. It's not just that there's a concern that bad evaluations will affect tenure or pay or teaching assignments, though there is that, but also that many professors want to be popular. There's a certain amount of ego satisfaction in being rated a popular professor and having students want to take your classes and fawn over you. Rigorous profs, however, are often not very popular. They may be respected but given the choice of taking a course with a tough prof and taking the same class with a less demanding instructor, students will take the easier way out. It's human nature, I suppose, but it can lead to a gradual wearing down of the standards of the more difficult prof.
The second possible explanation, one the authors didn't consider in much detail, is that in their rush to fill their classrooms with bodies schools are eager to appear more congenial to more students which means that they accept weaker students who should not be going to school at all. Schools compete with each other for students, they're eager to appear well-disposed to minorities, they diversify their programs offering degrees for non-traditional students who work full-time jobs and have families, all of which exerts powerful pressure to lower standards to accommodate these folk and to enable them to "succeed."
Perhaps a third reason is that the modern work place has evolved to the point where many employers don't much care what an applicant studied in college. They're only concerned that he/she be educable so they can teach and train the person to perform the job they want done. Thus the pressure to excel in school is diminished. One only need do well enough to be awarded a diploma, and in a healthy job market something will be available to the graduate.
Now that the job market is no longer so healthy it'll be interesting to see whether this has an effect on the seriousness with which students approach their academic work.
RLC