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I think the people who are against participation awards believe that too many kids (and parents, by extension) assume that not getting an award means that they're stupid and will never amount to anything. Another argument used by people against participation awards. "The kids will see them as worthless anyway, since everybody got one." I'm not entirely against coddling (participation awards, for example). It's a hell of a lot better than telling kids they are stupid and will never amount to anything.
The kids can see through the fake praise eventually and sometimes want real feedback.