Well, I guess it depends a LOT of what side of the situtation you are on. If you are receiving bad marks in a class that you are not particularly apt to the subject then you'd probably say effort should be played into account.
I think part of the delusion comes from the idea that if you try hard enough, you can do anything. If you accept that idea, then a student that tries really hard should be able to earn credit for their efforts, despite whether or not they understand the material.
There are many cases in which people would argue that effort should be taken into account, bad test takers, tests not being a reliable indicator of ability, etc.
But what if we argue the other side of the coin?
Is it "fair" to students who do understand the material and are doing well, for them to get the same grade as someone who doesn't understand?
What is fairness? Is it fair to the instructor to have to determine, this becomes an ethical concern, how much effort each student is giving and how many points effort is worth?
For that matter, isn't this giving students a break?
I've heard that MIT, Ohio State and other institutions have a "freshman forgiveness" option that allows student grades for the first year not to be calculuated, but other students from other institutions have it calculated into their GPA - does that allow a level playing field for students when it comes to graduate applications?
Just some random thoughts. - Vanes.