This reading discussed the reasons behind why some incentives fail to modify, or even worsen, certain behaviors. An oft-cited example of this effect is the introduction of financial incentives when donating blood. This makes the contrast between traditional and behavioral economics very clear - offering money to incentive an action is classically supposed to work, and yet the rate of blood donation fell, only recovering once the incentive was removed from play.
The blood donation example seems to relate to an aspect of persuasive design mentioned by this week's guest speaker, Sarah Newhall, of Blue State Digital. She noted that it's important to "make feel people like their actions matter" when engaging users in campaigns designed to strengthen the relationship between those users and a given brand. In this case, the "brand" is the blood donation (or perhaps the Red Cross), and people feel their actions matter by knowing that their contribution could potentially save lives. This feeling is powerful enough on its own, and any financial incentive changes the dynamic by compromising the person's ability to feel connected to the action in question.