Economics is premised on a tautology – a helpful one, but a tautology nonetheless. People are motivated by incentives. What is an incentive? Anything that motivates. How do we explain why Susie did x, y, z, or anything else? She must have had incentives. What are they? Could be anything that motivates her. See, a tautology.
Recently, Daniel Pink has written a book called Drive: The Surprising Truth About What Motivates Us to discuss exactly that: what are the best incentives to action? Geared primarily towards the business world, Pink uses several studies to show that the best incentives are autonomy, mastery, and doing better by ourselves and the world. 
As many of the amazon reviewers who gave Drive a low review mention, though, this conclusion is based on only a few very artificial studies. The motivational picture may well be more complicated, and maybe even more when we talk about school rather than business and children rather than adults.
Pink suggests that we went through several stages of motivation through human history. Motivation 1.0 was when motivation to work was based on basic human survival. Motivation 2.0 was the “carrot and stick approach” of rewarding externally by material goods, money, etc. Pink suggests that we are now entering motivation 3.0, where we need to realize that workers are best motivated by intrinsic rewards: the pleasure of doing the job well, the pleasure of being autonomous, and the pleasure of mastering things.
Now, let’s talk about school and kids. I think it goes without saying (even though I will say it) that the best moments of student performance happen when we have tapped into a student’s intrinsic motivations as defined above. Students do best what they derive satisfaction from doing. But here is the problem: there are many situations in school where students have to do what they do not like doing. It is an unavoidable part of the school day (wrongly lamented by progressive types who would rather see kids only do what they want to do). It can be assumed that most often, workers work in fields that they at least semi-enjoy (of course this is not always the case, but it is likely the majority). Kids, on the other hand, are compelled by the state and their parents to take biology, algebra, and civics. Thus, kids will very probably experience more situations where intrinsic motivation may either be hard to come by or impossible. (Some educationists suggest that intrinsic motivation is always possible and maybe it is if one has unlimited time to try and find it. Teachers, of course, are constrained by time and class size, so it may not always be feasible to help students find intrinsic motivation.)
All of this is to say that wisdom in supervision and teaching often consists of knowing what reward to use when. Sometimes, we can get students interested enough in the task at hand to harness students’ intrinsic motivation. Like everyone else, I highly recommend always trying this route first and student initiative produces the best work when they are engaged. One does not have to fight for student attention when the object of study does that job for us.
But there are also times when we may have to use external motivators because the students are engaged in an activity they have no real interest in and do not care to perform well on. Grades, stickers, a threat of a call to parents, etc, must be used to get students to work on the subject at hand. This is not the bad thing that progressive types think it is, as a valuable life lesson is to learn how to do things we don’t want to do, and train our attention so that it can focus on areas if may not naturally gravitate toward. If students only learned how to do what they had intrinsic reasons to do, they would never learn how to discipline themselves to do those life tasks (paying taxes, housework, etc) they will inevitably have to do later.
Does extrinsic motivators kill intrinsic motivators? Pink thinks so. I am not sure. I have seen no good evidence – studies or otherwise – that tell me that one cannot have one without undoing the other. It seems to me a simple fact: in some areas – those we are interested in naturally or can come to be interested in – intrinsic motivation will always be there. In other areas – those we do more because we have to than want to – extrinsic motivators may be the only way to keep us doing the task. I find it hard to fathom that external motivators for me to do taxes (I will reward myself with x once these are done, and if I don’t do them, the government will penalize me) would ever undo intrinsic motivators in other areas. I suppose that it may be true that use of extrinsic motivation may kill intrinsic motivation ON THE SAME TASK, but that assumes that intrinsic motivation already existed for the task (and if it did, we likely would not need extrinsic motivators).
Anyhow, the motivational picture seems to me more complicated than Daniel Pink wants to suggest. We all operate with internal and external motivators. Some tasks we do because we like doing them (and some of us are lucky to be employed doing such tasks). Other things, we do because we will be rewarded or penalized externally for completing them or not. The wisdom of supervisors and teachers is to know when employees or students need external or internal motivations, not simply to fear the former group altogether.
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