How Monitoring and Evaluation Kill Creativity and Learning

In Free to Learn, Peter Gray talks about the "playful state of mind" and how observation and evaluation have a "debilitating effect" on learning. He relies on a number of studies, some recent and some as far back as the early 1900s in developing his thesis (pp. 132-33):

When research subjects believe their performance is being observed and evaluated, those who are already skilled become better and those who are not so skilled become worse. The debilitating effects of being observed and evaluated have been found to be even greater for mental tasks, such as solving difficult math problems or generating good rebuttals to the views of classical philosophers, than they are for physical tasks such as shooting pool. When the task involves creative thought or the learning of a difficult skill, the presence of an observer or evaluator inhibits almost all participants. The higher the status of the evaluator, and the more consequential the evaluation, the greater the inhibition of learning.

Schools are presumably places for learning and practice, not for experts to show off. Yet, with their incessant monitoring and evaluation of students' performances, schools seem to be ideally designed to boost the performance of those who are already good and to interfere with learning. Those who have somehow already learned the school tasks, maybe at home, generally perform well in this setting, but those who haven't tend to flounder. Evaluation drives a wedge between those who already know how and those who don't, pushing the former up and the latter down. Evaluation has this pernicious effect because it produces a mind-set that is opposite from the playful state of mind, which is the ideal state for learning new skills, solving new problems, and engaging in all sorts of creative activities.

If you knew nothing more about the learning processes, how might Gray's points about observation and evaluation alter your view of they types of learning activities children need? What might you do different as your students walk in the classroom door this fall?