Interesting article in the Guardian:
Financial incentives have also been found to crowd out public spirit in settings less fateful than those involving nuclear waste. Each year, on a designated "donation day", Israeli high school students go door-to-door to solicit donations for worthy causes – cancer research, aid to disabled children, and so on. Two economists did an experiment to determine the effect of financial incentives on the students' motivations.
They divided the students into three groups. One group was given a brief motivational speech about the importance of the cause and sent on its way. The second and third groups were given the same speech but also offered a monetary reward based on the amount they collected – 1% and 10%, respectively. The rewards would not be deducted from the charitable donations; they would come from a separate source.
Which group of students do you think raised the most money? If you guessed the unpaid group, you are right. The unpaid students collected 55% more in donations than those who were offered a 1% commission. Those who were offered 10% did considerably better than the 1% group, but less well than the students who were not paid at all. (The unpaid volunteers collected 9% more than those on the high commission.)
What's the moral of the story? The authors of the study conclude that, if you're going to use financial incentives to motivate people, you should either "pay enough or don't pay at all". While it may be true that paying enough will get you what you want, that's not all this story tells us.
Paying students to do a good deed changed the nature of the activity. Going door-to-door collecting funds for charity was now less about performing a civic duty and more about earning a commission. The financial incentive transformed a public-spirited activity into a job for pay. As with the Swiss villagers, so with the Israeli students: the introduction of market norms displaced, or at least dampened, their moral and civic commitment.