In the social sciences, there is an oft-repeated maxim called Campbell’s Law, named after Donald Campbell, a psychologist who studied human creativity. Campbell’s Law states that incentives corrupt. In other words, the more punishments and rewards—such as merit pay—are associated with the results of any given test, the more likely it is that the test’s results will be rendered meaningless, either through outright cheating or through teaching to the test in a way that narrows the curriculum and renders real learning obsolete.
There's a dramatic illustration of this principle at work (with negative incentives) in The Wire, the HBO series about Baltimore detectives' endless and mainly fruitless struggles against the drug trade (Season 3, episode 1, Time after Time). A city councilman who's trying to get the police commissioner to dance to his tune flays him and the mayor at a public meeting for high crime stats. Under pressure from the mayor, the commissioner promises to reduce felonies by 5% and keep the year's murder count under 275. The commissioner and deputy commissioner in turn lay the wood to their subordinates. Here's Rawls, the dickish deputy (my rough transcript):
You will reduce the felonies by 5% or more or...let no man come back alive. In addition, we will hold this year's murders to 275 or less...[there's] no excuse I will accept. I don't care how you do it. Just fuckin' do it.