Here's a very interesting experiment:
New York City has decided to offer cash rewards to some students based on their attendance records and exam performance. Diligent, high-achieving seventh graders will be able to earn up to $500 in a year. The plan is the brainchild of Roland G. Fryer, an economist who has been appointed as “chief equality officer” of the city’s Department of Education.
In this NYTimes column Barry Schwartz, psychologist and author of The Paradox of Choice, points out some of the pitfalls in this approach. First, he highlights the key assumption behind this experiment:
The logic of the plan reveals a second assumption that economists make: the more motives the better. Give people two reasons to do something, the thinking goes, and they will be more likely to do it, and they’ll do it better, than if they have only one.
But, but ...
Unfortunately, these assumptions that economists make about human motivation, though intuitive and straightforward, are false. In particular, the idea that adding motives always helps is false. There are circumstances in which adding an incentive competes with other motives and diminishes their impact.
He goes on to cite some very interesting -- and rather counter-intuitive (at least to me) -- evidence from psychological research. As they say, read the whole thing.