The obvious problem in discussing this issue is figuring out what we mean by 'effort'. As Weimer puts it:
If effort counts, we should seek ways to make the assessment of it as objective as possible. Maybe discussion of that topic begins with a definition of effort, or a description of what it takes to learn something.
So let's start with the argument against grading on effort: 'Effort' looks like a means, something you have to put in in order to master a body of material. But grading should reflect the mastery of said material, not the amount of energy students need to expend in order to master it. After all, if a student can master a body of material with little effort, why should her grade be lowered on those grounds?
A retort? It's debatable whether content mastery exhausts all the learning objectives we care about as instructors. Many of the elements that might be classified as student 'effort' (revising their papers, class participation, office hours visits, etc.) might be seen not as content-based learning objectives, but as habit-based objectives. That is, students' grades reflect the habits we have good reason to believe will prove valuable to them academically and professionally. Yes, ultimately, we (and the rest of the world) want students to be able to perform particular tasks well. But one mark of being a student is not necessarily being able to do the task well and hence needing guidance (and incentives!) to develop the habits needed to perform particular tasks well down the road. Grading on effort, in this sense, is legitimate because the grade will likely track students' progress in acquiring these valuable academic habits, even if their performance on tasks lags behind their acquiring these habits.
But now I wonder if grading on this basis amounts to grading on 'effort' at all. For one, what seems relevant is not the raw quantity of energy students expend in a class but its directedness. Revising papers, etc. are forms of intentional activity that have more learning value than other kinds of 'effort' that might not help students learn much (in philosophy, putting quotes from philosophers on note cards and trying to memorize them takes effort, but has low learning value). Second, if 'effort' is instrumental, then grading students on the degree to which they engage in habit-forming activity doesn't confuse means and ends, because the acquisition of the habits is itself an intermediate end that subserves the final ends of disciplinary content mastery. You're not grading 'merely' on effort; you're grading on the basis of a legitimate, albeit intermediate, learning objective.
In any case, I'm with Weimer in that I'm not sure we can make any headway on this question unless we understand what we mean by 'effort' and why it might be legitimate for it to influence students' grades.