My job is selling technology. Actually I'm more of a translator. I sell technology to other businesses and that's where things get weird. There is a bewildering array of tech out there and unfortunately many companies think technology sells itself and the value that the technology delivers should be obvious. Wrong. That's where I come in. I said I was a translator. My job is to translate techno babble into value that customers understand. This blog share my adventures with high tech sales. Selling high tech is fun so come join me on my sales journey!

Sunday, 3 November 2013

Economic theory is flawed

With rising energy prices, today I decided to purchase some high efficiency LED light bulbs to replace some fluorescent bulbs and some small halogen bulbs (there are no fluorescent equivalents for).

These are lights that are frequently used in my house so the economics of switching to LEDs makes sense.

In total I spent £60 on these bulbs - the price of LED technology has fallen significantly. I ended up buying them direct from China since that's where they are made. I could have bought them in the UK for £78.

So you may be wondering how I came to the conclusion that economic theory is flawed from this simple purchase?

Firstly VAT played a role in my purchase decision. £60 + VAT = £72.  The UK supplier would make £6 on the transaction. If there was no VAT I would have opted for the UK vendor.  Postage times from China/Hong Kong vary wildly. I've had 3 days from order and also had 3 weeks hence £6 would be worth improving the predictability. That being said I've also have 3 months for something to be delivered by Royal Mail....

So VAT is a barrier to UK GBP. My transaction with China doesn't register as GBP other than an balance of trade import.

Does that count as economic theory is flawed ? Not quite.

The real hit to economic theory is the fact I am doing the right thing by being energy conscious.

The purchase of these items is small beer in the economic impact. In total I bought 13 bulbs.
The bulbs they are replacing are high usage bulbs. Assuming these bulbs have a 6 year life (10,000 hours), which is actually on much lower than the 50,000 hours life quoted by the manufacturer, the bulbs will save £405 over that 6 year period. Not bad for £60 investment. That's based on today's electricity prices which if they rise, will improve my return on investment.

So in otherwords, the electricity company is losing out by me doing the right things. GDP will fall.

If every household in the UK (approx 22M houses), did this then it will wipe out nearly £9Bn over 6 years of GDP for the energy companies. If there was the drop in GDP then it would be deemed bad yet saving costs and conserving energy is absolutely the right thing to do. Hence my observation that economic theory is flawed.

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