This may be worth experimenting with. If anything, we can be sure that the traditional model of schooling just isn't working out the way we hoped. Is this model going to work? I'm not sure, so why not test it out? We don't have to implement it permanently, just put it in place for awhile and measure the difference.
There will be much bias because students would be more likely to go easy on friends while they will deal with enemies harshly. The peers in power may spread rumours to their friends about what the student did and the student would end up being rejected by those people. In fact, the supposed troublemaker may not even have done anything wrong but school bullies may deliberately sabotage them. This leads to bullying and yet another cycle of peer punishment would suffice. If mere children are allowed to give punishment to their fellow students, it may put the idea of authority into their heads. They may grow up thinking that they can do whatever they wish and that they are in charge. This could make them rebellious and arrogant, which are bad for their moral development.
This is a very flawed idea. First off there will be much bias because friends will be more likely to go easy on friends while enemies that they have in their school they will deal with harshly. Also is it a good idea for students to know what other students did wrong. The peers in power will inevitably spread rumors to their friends about what the student did and the student will be rejected by those people. This also makes the administration look weak that they cannot handle punishments
As flawed as traditional school systems are, switching entirely to student peers determining punishments seems like a flawed concept. Young students lack the years of experience that adults have, and are less likely to weigh the consequences of their decisions. While taking advice from a student panel could be helpful, a principal should have the final say.
The punishment of student offenders should no depend solely on the student's peers. Principals and other administrators should not fully be in charge, but a collaborative effort should be made. School administrators are often out of touch with the lives of students so they would not make better judges than the students, but students might not be fair either. They should cooperate together to make the best decision.
It's not who hands down the punishment that should be the issue, it's what the punishment is actually achieving.
If you get into a fight at school, is suspension really the best option? Chances are at least one person in the fight has attitude issues, and I would say there is a good chance he/she doesn't have a positive attitude about school either. So you're telling me the best option to punish this person by giving the a break from school? They probably won't care, and if they do this will fall into the category "the man trying to keep me down" and their hatred will just grow.
It might not be a bad idea to involve the students in the decision making process. They have a completely different view of what happened, and probably a better idea of what punishment might be effective.