WHILE President Bush admits that "dollar bills don't educate students," his plan for educational reform holds on to the myth that extra money, in the form of merit pay, buys better teaching.I base "myth" on my experience in New York City schools. I began my service as a "teacher-in-training" at a high school in upper Manhattan in September 1936 after passing a battery of competitive examinations. The "t-in-t" category had been instituted as an economy measure during the depression; it netted qualified teachers at cut-rate pay. For a daily wage of $4.23 I taught three English classes, met a home room class, distributed textbooks, and ran the department mimeograph machine. My take for the years was a bit over $700. I would have done better with far less work as a stock clerk at Macy's. But I had a mad itch to teach. It never occurred to me that being paid a pittance could justify doing less than the best I could. I spent virtually all my leisure time grading compositions and thinking of how to make "Silas Marner," that moribund old masterpiece, tolerably alive for kids who could be as restless as the breakers at Rockaway Beach on a windy day. My classes were noisy, but lively and responsive until the moment a menacing shadow darkened the threshold of my classroom. My chairman, Edwin Van Buren Knickerbocker, was maki ng another surprise visit to observe my teaching. Mr. Knickerbocker's dour presence had a formidable effect. I began to stammer, digress, leave sentences hanging in midair. My students froze in sympathy. In his seat at the rear of the room, my visitor wagged his head in disbelieving disapproval. Afterward a written report of my appalling performance turned up in my letter box. Without the quixotic determination of a callow 22-year-old, I would surely have quit right then. While I was unmeritorious in my chairman's eyes, I had evidence to the contrary: my rapport with my students who, possibly because they sensed my self-confidence could use boosting, left gracious anonymous notes; comments from parents; the number of pieces written by my students which were accepted by the school's literary magazine. ACTUALLY, after that slippery first year, I learned that I needed to please no one but myself. Life was easier if I kept students interested and working. Until 1960, when New York teachers won collective bargaining rights, my pay, even with mandated annual increases, was pitiful. It was usual for teachers, especially if they were heads of families, to take extra jobs. I escaped moonlighting only because my wife Miriam was also a teacher. It helped that we lived by Henry Thoreau's aphorism, "A man is rich in proportion to the number of things which he can afford to let alone." We kept on course by remembering the Talmudic saying, "Who is rich?. He who is contented with his lot." Am I implying that I didn't want better pay? Not at all! But I would have been unhappy with merit pay, which would have amounted to, at most, a "carrot" of a few hundred dollars. Carrots are dandy devices to keep donkeys moving. People, thankfully, are not donkeys. I wanted to rise together with my fellow teachers. I didn't want special treatment for myself or a chosen few of my colleagues. I believed then, as I do now, that - with no objective way to measure excellence - singling out "superior" teachers for extra pay is the surest way to divide all teachers and destroy their morale. A Chinese proverb wisely points out that even the fingers of a hand are not equal, yet all the fingers are necessary. I remember teachers who worked best with slower students, others who outdid themselves with bright students. A former colleague nicknamed "Bloody Mary" earned the respect and affection of her students because, in their words, "She taught us French, you betcha, sans douts." Ultimately, all teachers worthy of the name get the rewards they earn. Henry Adams' overquoted remark - "A teacher affects eternity is an embarrassing rhetorical extravagance. Yet after 30 years I get a letter from a former student who thanks me for getting him to write "muscular prose." A onetime counselee insists that without being able to unburden her torment to me 25 years ago she would not have survived, much less gone on to a fulfilling career as a research biologist. This lovely young woman overstates the case; she is one tough brawler in life's arena. But these days I accept all praise as merited, as deferred merit pay. I do not report this extra income to the IRS.