At wit's end over the tortoise pace of school reform, taxpayers constitute a perfect audience for self-styled reformers who claim to have the solution for failing schools. The latest panacea being peddled by these modern-day Elmer Gantrys is merit pay for teachers.

The pitch is straightforward: education is no different from any other policy area in what shapes behaviour. Paying teachers strictly on the basis of their classroom performance will result in positive outcomes for students.

But a working paper (pdf) just released by Harvard University economist Roland G Fryer flatly contradicts the argument. In a randomised trial in more than 200 New York City public schools, he found "no evidence that teacher incentives increase student performance, attendance or graduation". On the contrary, Fryer reported that teacher incentives may actually decrease student achievement, especially in larger schools.

It is tempting for teachers to gloat because they have long maintained that such strategies would do little, if anything, to alter outcomes. A quick rewind through history explains why they were right.

Pay-for-performance began in England in about 1710, when salaries were based on test scores in reading, writing and arithmetic. The rationale was that it would help keep students from poor families in school, where they could learn the basics. The plan became part of the Revised Education Code in 1862, and remained on the books for more than 30 years.

The trouble was that the strategy sucked the creative life out of classrooms, as teachers became obsessed with the code. When it became apparent that the approach demeaned education, it was dropped in the 1890s. Pay-for-performance re-emerged briefly in Canada in 1876, but it ran into similar difficulties and was terminated in 1883.

Then, in 1969, the movement came to the US. Under pressure from what was then the department of health, education and welfare to close the appalling achievement gap between black and white students, the Texarkana, Arkansas public schools adopted performance contracting. The district offered the federal government an offer it couldn't refuse. It would return funds for students who failed to pass tests at a stipulated level.

The results seemed too good to be true. Students averaged gains of more than two grade levels in reading and one in math after only 48 hours of instruction. But an investigation revealed widespread cheating. Still undeterred, performance contracting moved on to 18 other cities in Arkansas. But when there was no evidence of improvement, the programme was ended.

Still undeterred, reformers introduced a pilot programme known as the Texas educator excellence grant in the 2005-06 school year. It was expanded to a statewide programme a year later by the legislature, which earmarked $100m for teacher bonuses tied primarily to test scores at 1,150 schools. But an evaluation by the national centre on performance incentives at Vanderbilt University found that the effect on student achievement was "inconclusive". In May 2009, the programme was quietly retired.

Which brings the issue back to the Fryer report. There are four possible explanations for its counterintuitive results. First, the incentives were simply not big enough. Teachers in schools who hit the target received close to $3,000. This is less than 4% of the average annual teacher salary in the sample. Second, the plan was too complex. Teachers were unsure about how much effort they needed to exert. Third, group-based rewards are ineffective; the overwhelming majority of schools voted to have the money distributed on a group, rather than an individual, basis. Fourth, teachers were at a loss to know how to improve student achievement. This is especially so when students come to class with huge deficits and little parental involvement.

It's highly unlikely, however, that the evidence amassed over the years will finally put an end to teacher incentive plans. Educational outsiders have the luxury of not having to live with the consequences of their delusions.