Unquestionably it is the case that offering financial incentives can, and does, undermine motivation for certain behaviors. Not to be too crude, but if I offered my wife $100 in order to have her cook me dinner, she’d probably be less likely to do it than if we had planned something together. You can imagine other activities.
Without overblogging this. to me this is not a case of financial incentives undermining other ones, it is simply a question of clarifying what the goods in question are. But ignore that. When folks start seeing the wide applicability of this principle, they are lured to start thinking that financial incentives undermine all behaviors and have found yet another crutch for an intrinsic (you like that!) dislike of markets.
Here is one application. I don’t buy it on net, but it is plausible: “We can’t possibly start paying cash to people to donate kidneys, it will undermine the intrinsic motivation to do it and we will get less kidneys. We want more kidneys, so we should avoid payments.” (Ignore all of the other reasons you may object to paying people for the moment).
But I heard this one recently, with the causality a bit twisted:
“Teachers of our youth perform a service that is as valuable as anything you could possibly do for a career. It is a vocation for many, and it is vastly underappreciated and underfunded. Therefore, because teachers are so intrinsically motivated to teach our young people … we need to … offer … additional … financial incentives.
As I like to say. You may try to hold both of these positions, but I suggest it is pretty awkward. YCHIBW.