Depends on the rigor. The typical grade school curriculum is expecting you to keep up and get 80-90% of the content on a first go. Colleges can experiment with a variety of other kinds of methods. It's college, so there's no sense of "standaridized" content at this point.

For some, there's the idea of pushing a student to their limit and breaking their boundaries. A student getting 50% on a hard course may learn more and overall perform better in their career than if they were an A student in an easy course. Should they be punished because they didn't game the course and try to get the easy one?

And of course, someone getting 80% in such a course is probably truly the cream of the crop which would go unnoticed in an easy course.

I think the prior probability in the bayesian sense is that the two entering cohorts are equally skilled (assuming students were randomly split into two sections as opposed to different sections being composed of different student bodies). If this were the case, the implication is that performance differences in standardized tests between cohorts are due to the professor (maybe one of the profs didn't cover the right material), so then normalization could be justified.

However if that prior is untrue for any reason whatsoever, the normalization would penalize higher performing cohorts (if it were a math course, maybe an engineering student dominated section vs an arts dominated cohort).

So I guess.. it depends

Did the cohort due poorly or were the tests given to that cohort harder than in previous years? Or was the teacher a more difficult grader than others? You're jumping to the conclusion that the cohort was underperforming just because the grades were lower when other things out of their control could have been involved.

The idea is to identify if there is a particularly easy/hard exam and the average score of the cohort is significantly different to how they perform in other classes. "Doing poorly" is quite hard to define when none of the tests, perhaps outside of the core 1st and 2nd year modules, are standard.