Salaries should be fair, based on market value, and completely out in the open. I don't understand the absurd secrecy and awkwardness around compensation, culminating in the unholy obscenity of the yearly performance review. You make what you make because that's what it takes to keep you there. If you don't love it, leave. If you're not happy with the money, get another offer. Apart from that, your work should be what motivates you, not the paycheck.
The Netflix culture slides captured my feelings on the topic well: http://www.slideshare.net/reed2001/culture-1798664 If I ever go to another BDC after Yahoo, it'd probably be Netflix.
Salary, in this case, is not the type of incentive we're talking about. Having a decent salary is just to get the employee willing to work - not as an incentive to work at max capacity.
What we're talking about, really, is already past salary: is a group of fairly paid people more efficient and creative when motivated financially (say, by extra bonuses or salary increases) or by promises of autonomy (say, 20% time).
Thus, the candle problem, when placed in the real world, would have three groups: a control group which is paid 'decently and fairly', and a group that is paid 'decently and fairly' and is given financial incentives beyond that, and a group that is payed 'decently and fairly' and is given autonomy as an incentive.
That's fine, but you still need a control group that is given no compensation at all as a baseline.