"I'd round up rather than down...The end result was a grade distribution that was just slightly more generous than the last time. And hence I perpetuated the cycle."

Next time, why not begin with a slightly harsher grade distribution? Then selective rounding up would result in the same distribution as the previous year.

Why did you curve your class? I mean, I know that we expect grades to follow a statistical curve, and I can almost see it justified (although I disagree with it) in a class with more subjective grading (eg history, languages), but questions in freshman calculus have well-defined scores for different answers and parts thereof.

Certainly everyone got a numerical score at the end... but what letter grade should, say, a 77 be? There were no departmental standards, I don't have any particular personal standards, and I hadn't tried to match the difficulty of the exams to what was done previously.

I could do something like 90-100 = A, 80-89 = B, etc., but that is no less arbitrary than any other system, and in my experience it is customary (as well as, IMHO, a good idea) to write harder exams and then make the cutoffs more generous.

Do you or does your department care about the quality of the students you promote or attract? If so, having and reflecting on grading standards is relevant to that.

If you just want to be a research department with a minimal or laissez-faire approach to your undergraduates, then yeah, why even bother with grading.

Were the majority of students attending Berkeley in the 30s and getting 2.35s (intellectually) worthless people?

Can a department only care about quality if it says most people don't have it? Even if that is true of the general population, who are you to say that's necessarily true of your classroom?

Grades are not binary. An average grade doesn't indicate worthlessness, intellectual or otherwise.

To answer a slightly different question than the one you asked: I don't think a department can care about quality of its students if it marks differently-qualified students as equal.

Why do professors grade their own students anyway? Why not have it done by a less biased examiner, like someone from another university?

You wouldn't be allowed to review your own journal submissions, or even those of a close peer (I hope), but it seems student assessment is done in a much less rigorous way.

I could see that working for very standardized courses with objective tests, like intro calc, but it'd be more problematic in higher-level courses. There isn't usually 100% consensus on how to do many things, like what constitutes a good project and what things are most important in a write-up (and the higher-level you get, the more sharp disagreements between professors get). So students and professors, fairly reasonably, bridge the gap by communicating about shared expectations. If then a third party grades it, they might be grading in a way that isn't actually consistent with what the professor asked the students to do, and with what he/she led them to believe would carry the most weight in grading.

An analogy might be going back and forth with a client on contract work, delivering a result you're pretty sure they're happy with, but then having it assessed by someone other than the client, who didn't participate in the previous discussions. It's a sort of multiple-bosses problem, which can make it harder to focus and feel confident that you know what's being asked of you.