My manager has recently really been pushing to use velocity as a target and measure of productivity. We are currently working at an average velocity of 50 story points. My manager wants us to increase it by 40% to 70 story points (with no increase in team members). If we don't achieve this increase he wants us to deliver a full break down explaining why.

The whole idea of measuring team performance by velocity and using it as a target seems wrong to me, but I am finding it difficult to explain why. Any help? Why isn't this the right way to measure and incentivize productivity?

Well, it's perfectly simple to increase velocity by 40% - just add 40% more points to all your estimates and do the same amount of work.

Given that this is so, it should be apparent why using velocity as a target is wrong, it just encourages inflated estimates.  

A less glib answer is that your estimate already assumes you are going as fast as you can while doing everything correctly.  The only way to really increase productivity by 40% is either to work overtime or to not do everything correctly.  Both of these speed things up in the short term, but slow things down in the long term.  And the long term in this case isn't very long, a month at the outside. The optimal long term strategy is to never go faster than your sustainable pace.

Peopleware talks eloquently about the issues of trying to force programmers into higher productivity , and is an often cited classic.  But in general it won't be easy to change the mind of a manager that is going down the path that yours is.  Your project may well be in trouble - this is certainly a red flag.
