Back when I was studying economics, we learned all about the rational behavior in which individuals and organizations engage in response to various incentives and disincentives. "Home Economicus" is the generic rational individual that we assume all people to be -- actions are based on a rational evaluation of what actions would most benefit that individual.
Though all sorts of exceptions exist, the theory generally holds in most situations. We can predict that a person will be more likely to buy a product when the price is lowered, for example. In the same vein, we can predict that a teacher will change their behavior if offered a bonus when he/she reaches certain benchmarks. Such behavior would be considered rational.
Here's the problem that we sometimes overlook: what is rational to economists is not always in the best interest of society. Here's the latest example: Flypaper blogs about a plan in Los Angeles to allow certain students to attend school for only two hours per week. The plan is labeled "unbelievably stupid" and I largely agree.
But the plan is anything but irrational. The main goal of the program seems to be to encourage students to enroll in this new school rather than dropping out. They may not learn much by attending school for only two hours per week, but the fact that they're enrolled means that the school district continues to receive money from the state for each student -- money they wouldn't receive if the student dropped out. The plan is, in short, in the best interest of the school district. Those who came up with the idea were acting in their own self-interest.
Self-interest is a powerful motivator. But it's not always the solution.