I'm not sure how long this author's version of the article (14 page PDF) will remain available, but if you want a detailed technical explanation of how automated student assessment might be conducted, here it is. Basically, the system analyzes a student's online activities to create a 'knowledge map' of what they've learned, compare it with a similar knowledge map constructed from the instructor's course outline, and make recommendations based on that. It is (to my assessment) more mechanical than artificially intelligent, and I wouldn't expect it to survive robust empirical testing, but it points the way, and that's what's important.
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