Incentives are what make you do things.
Have you ever been to a festival party where drinks might cost a bit more but where you can get money back from returning your glass? It's an example of a "micro" incentive, because a small amount of money is enough to motivate the behavior. It works because an action that was previously free (throwing the glass away) now has a small cost. If this cost is greater than the annoyingness of having to keep the glass, we’ll bring it back. It seems crazy when explained like that but it’s actually what we do subconsciously.
Of course, there are people who would have brought back the glass even without the incentive, and others who will throw the glass away anyway. But the exceptions are not important. What we care about is if the incentive creates more of the behavior we want. In the case of returnable glasses, I think we can safely speculate that it does.
An incentive can be a carrot (reward for good behavior) or a stick (negative consequence for bad behavior). But in both cases the incentive amount must be proportional to the difficulty or importance of the behavior.
Some people see incentives as some kind of a trick. As in “why don't people just do the right thing by default?”. Although I do sympathize with idealism, I’m more interested in ways to understand human nature and deal with it instead of dreaming about how everything could be different if people were just “better”.
Don’t get me wrong, intrinsic motivation does exist but I don’t think it’s as “pure” as people might think. It’s most likely a combination of education and culture, which means that it’s also hackable. I agree with Balaji when he says “If code scripts machines, media scripts human beings”.
Our minds often simplify things to help us make decisions. It would take too much energy to think about all the variables that go into making the perfect decision every time. So instead, we make a quick choice and then rationalize it later to feel good about ourselves.
If we have to leave the festival in a rush, without the financial incentive our agenda is surely more important than returning the glass. “It's not that big of a deal” we’ll think. And it’s precisely for these small decisions that we often don’t do the right thing because we think it doesn’t really matter.
When parents ask their children "what do you think would happen if everyone did the same thing?", they try to teach them about selfishness. But the truth is that most people don't think about 2nd or 3rd order consequences to all of their actions everyday, it would be too tiresome.
Some actions either don't have big consequences if done at a small scale, but also don't have immediate or visible results. Eating bad food is a good example. Eating a cookie once in a while is not a big deal. But how much is too much? The long term consequence is not clear in our mind because we can convince ourselves that we'll compensate by doing more exercise tomorrow. The immediate consequence is pleasure from the taste of the cookie. Good immediate consequence and blurry possible bad consequence in a long time? Easy decision. In order to make the correct decision right now, we need to have a clear vision of the consequences and the willpower to do the right thing. Of course the "best" decision healthwise would be to never eat cookies. But if you really like them (as I do), it’s probably worth it once in a while. So the right decision really depends on the frequency of the cookie eating, and of course the right frequency is a personal choice. Thinking about all of this every time we want to eat a cookie is annoying so we will most likely just eat it.
That’s where short term incentives can help. We could for example use a continuous glucose monitor to see the impact of food on our blood glucose. We could set an alert if our blood glucose reaches a certain level. This way, eating a cookie has an immediate and quantifiable result: we see the blood glucose spike. We now have an incentive to not eat the cookie.
I've already written a bit about why one should choose some personal guidelines. I think vision and incentives are complementary. The long term vision helps us planning how much cookie eating we want, and the short term incentive helps us follow the plan every day.