On whether monetary incentives make you dumber when doing something that requires any creative or critical thinking:
…When your employees have to do something straightforward, like pressing a button or manning one stage in an assembly line, financial incentives work. It's a small effect, but they do work. Simple jobs are like the simple candle problem.
However, if your people must do something that requires any creative or critical thinking, financial incentives hurt. The In-Box Candle Problem is the stereotypical problem that requires you to think “Out of the Box,” (you knew that was coming, didn't you?). Whenever people must think out of the box, offering them a monetary carrot will keep them in that box.
A monetary reward will help your employees focus. That's the point. When you're focused you are less able to think laterally. You become dumber. This is not the kind of thing we want if we expect to solve the problems that face us in the 21st century.