4 ms·
GD grants are so small that a roof is worth more than a grant.
by reagency 11y ago
GD grants are so small that a roof is worth more than a grant.
- savanaly 11y agoIf we grant your condition of the grant being small relative to the value of the roof, the following scenario might play out. Suppose GD will give 10 if you have not upgraded your roof. Suppose a roof costs 100 and benefits you 150. Suppose fertilizer costs 100 and benefits you 145. In the absence of any potential GD grant then buying a new roof is both socially optimal and the thing the farmer is incentivized to do. But with the potential for a GD grant then buying a new roof is still the socially optimal choice, but the farmer is no longer incentivized to do it. Thus, a farmer might forgo buying a new roof in the hopes of securing a cash reward, which is inefficient.