Do we talk about their idea of rewarding the popular/"good behaving" (Or their suggested idea of incentivizing such behaviour.) type of people" you want to play" with here?
It's a good theory, but it doesn't work in reality.
Many people are very petty, and would turn a game with such a concept into something very bad.
For example, if you downgrade "A" for being an absolute jerk, but he has a lot of friends, he might convince his friends to downgrade you. There might be measures against this, like in order to grade someone you have to play with them/have evidence, but "A" might convince his friends to hunt you down in a game, and antagonize you, or simply report things out of context. If there's no chat system, the grading system would work on behaviour, but this could also be reported out of context by a group of people in order to convince an admin to raise your costs.
And I doubt that they would hire 20+ million admins to personally investigate/be a part of every game, chat log and circumstance of a report in detail -- but still, even that won't guarantee a fair community in a game with a concept like that. People with slightly/very different opinions, perspectives and so on would eventually be frozen out, forced to either submit to whatever is the norm at the time or pay a lot more money.
Many people have radically different opinions and ideas, but they tend to get frozen out of the popular community in one way or another, and the reward/punishment program would exaggerate this type of behaviour among humans to the extreme. Valve must know this, so I do not understand how they could even entertain the idea of implementing their idea. They must know that people don't behave like that -- they never have, and never will (Most likely.) across such a vide variety of people.
I do welcome any insight into how it might work, but to me, it just seems illogical and highly destructive. As I said, it forces people to either submit to the 'accepted behaviour model' (Whatever that might be -- it would be defined by the majority of people, which is wrong.).
Whatever happened to individualism?
However, I'm not entirely against it. It's a good experiment, but their current idea, or atleast how they pitched it, doesn't sound good, for reasons I explained. It sounds a bit like extreme communism with money as a reward (Saving money.). And incentivizing behaviour across a wide variety of people with money is NOT a good idea, certainly not on such a large scale.
The current pay-to-play model is indeed broken though, cause you have to pay for content or to eventually progress (Some games let you play to a certain level then, more or less, force you to pay to progress any higher.)