Incentives do work in general. Sometimes they are abused. Incentives with no checks and balances are always abused. I don’t think the generalized problem you discuss above is broadly general
Incentives can work, but most governments and businesses are still only mediocre at them even with enough money to throw at the problem they get to do do-overs when they get it wrong.
Trying to do this with humans on a big scale combines the worst of software development in the days of punched cards, working without anyone having given you a formal language spec, and black-hat hackers on the modern internet.
It is very very easy to pick your incentives badly; you only get feedback on a very slow cycle (in the punched card days you might run the program overnight and only find it crashed on line 32 from a typo the next morning, but it's much slower than that in meatspace); and you also need constant fine-tuning as people interested in gaming the system share their methods for doing so.
Trying to do this with humans on a big scale combines the worst of software development in the days of punched cards, working without anyone having given you a formal language spec, and black-hat hackers on the modern internet.
It is very very easy to pick your incentives badly; you only get feedback on a very slow cycle (in the punched card days you might run the program overnight and only find it crashed on line 32 from a typo the next morning, but it's much slower than that in meatspace); and you also need constant fine-tuning as people interested in gaming the system share their methods for doing so.