It obviously doesn't scale, so we'll use random sampling.
This saved a bunch of time on actually grading assignments and made us write a very clear and unambiguous rubric (which required a very clear homework) and also demonstrated to the students that grading was not arbitrary.
Peer teaching/grading potentially scale out.
Several universities [1] scale out personalized instruction and interactive grading by hiring students from previous cohorts and paying them either in course credit (taking a "course" that involves teaching students in the current cohort) or at a low rate (possibly subsidized by financial aid) comparable to other on-campus student jobs.
[1] "Scaling Introductory Courses Using Undergraduate Teaching Assistants", SIGCSE '17, https://doi.org/10.1145/3017680.3017694
(I want a browser extension linking doi to google scholar btw)
There's still a scaling problem, but I think it makes the ~200 student classes we have now more feasible than 100% autograding. I also like the other commenter's suggestion of coming back to interview certain students each time, if they need it.
A lot of stuff you learn and the way you learn it isn't necessarily pleasant, but frequently you still have to do it and you really discover 20 years later why it was needed.
And I'm not passing judgement on the choice made, nor saying the constraints aren't there, nor saying anyone should do anything different. I'm just pointing out that the scalability constraint will affect the test possibilities, which will affect the quality of the measurement. Feel free to disagree with this all you want.
EDIT: Also, I do happen to have some inside knowledge by having worked in higher education for about a decade, starting in the mid 00s. Coincidentally, most of my work was on cost-saving measurements, designing a few algorithms that allowed universities to reduce their teacher headcount (first at a university, then at a software vendor), so yes, the #1 goal there was saving money. But I don't think having done this affects my answer, nor I do think that I deserve special treatment. I'm merely answering to a chain of comments.