Thursday 17 December 2020

Home Economics: Why we are not learning how to cook even when we cook.

The weekend newspaper fans across the kitchen table and the glossy supplement catches your eye. As you are perusing, you come across a recipe and suddenly get the idea stuck in your head that you simply must make this tonight.

But, how do you go about it? Are you the type of person who worries about needing the specific type of mid-sized game bird, and go from shop to shop in search of the holy quail? Or perhaps you are a chancer, a substituter, a leaver-out-altogetherer – you live for culinary Jenga.

Most people learn to cook like this but I suggest this is not really learning. Or at least how we think about learning in many other areas of life.

When you first learn economics, you generally learn a collection of models (I could use other analogies, but this is a vaguely economics-related blog and I’m trying to protect the brand here). To really understand models, you need to play around with them. What happens if I increase this parameter, what if the situation was reversed? This is why exam questions are usually slight adjustments of the main model, to check you actually know what you are doing.

You may have heard of some chefs being “classically” trained. All this means is that they have learned to cook by making classic French dishes (think duck’a l'orange or coq au vin). It is often said that a chef needs to master the classics before you go on to create anything yourself. I don’t think this is strictly the case, but what it does do, is give the chef a collection of techniques and an understanding of why the recipe works. For example, orange works with duck as duck meat is strong and fatty, the orange provides sweetness and acidity to cut through the fat and provide freshness. This is why you often see duck paired with other fruit in restaurants: they are essentially variations on a classic recipe. It is the same with economics as you often take a basic model and tailor it to a specific situation.*

When you read most recipes, however, they don’t really give you an understanding of what each component does. One exception to this is Felicity Cloake’s “how to cook the perfect…” in the Guardian. The idea is quite simple: she reads lots of recipes and synthesises them to make what she deems to be the perfect version of a recipe. But the best thing about it is that she explains what each part of the recipe is actually doing, by noting the differences amongst recipes. It doesn't matter if it is the perfect recipe or not. By playing around with different variations and noting what happens when she tries means you actually learn something from her.

The reason why all this is so important is often (and you may have noticed this) things don’t always go according to plan in the kitchen. When you mess up it is incredibly frustrating. The pile of washing up grows as you have turned the bottom of the pan to carbon. You are stressed. You are hungry. The most frustrating thing of all, however, is if you don’t understand why the thing you have made went wrong. It just didn't work. Usually, this means never trying the recipe again.

I am here to tell you that it is not your fault, you just have a bad teacher: a recipe hardly ever tells you what happens when things go wrong. For example, google any meringue recipe and most will tell you the bare minimum. It doesn’t really tell you what the hell stiff peaks are (a David Lynch adult movie?), or why you need to add the sugar slowly, or what the sugar even does? It also doesn’t tell you that you can overwhip a meringue, what that looks like, or how to remedy it if it happens.

The thing is, when stuff goes wrong and you understand why it went wrong, you have actually learned something. It’s a radical new pedagogical concept called “learning from mistakes”. This is a good thing. However, you can only really learn from your mistakes if you understand what each component does. It is equivalent of changing loads of stuff in your model at the same time and wondering what made it crash. You need to change one bit at a time to see what happens. 

So how do you go about learning how to cook? Well, the way I earned was by setting out to learn different techniques and researching them before I attempted it. Recently, I have been trying to improve my pastry skills so I am making a lot of pies and tarts. I now know why you need to “rest” the pastry in the fridge, what it actually does to the dough, and why you can’t really skip it.

Although the learning curve is a bit steeper, it does end up saving you a lot of time if you enjoy cooking. You don’t have to rigidly stick to the same few recipes and it's much less stressful. Things go wrong less often, and you can also understand what stuff you can actually leave out of a recipe or substitute. If I do use recipes, it is usually for inspiration or to learn a new technique.

Cooking, it is my hobby, so I am going to spend a lot more time on it than the average person. But if you want to make cooking more enjoyable and less stressful, you got to do your research. Also, am happy to help if anyone wants advice :)


*I don’t want to enter this debate but you don’t have to be classically trained to be an amazing chef, and you don’t have to be neoclassically trained to be an amazing economist.

Friday 11 December 2020

Why did some people think the UK/EU deal would be the “easiest in human history"?

A lot of people think free trade is all about tariffs. I think this is why some people thought the deal between the UK and EU would be the “easiest in human history”.

The logic for free trade is compelling because it is not immediately obvious. If you know the basic story, you may know a little bit more about trade than the average person. This may lead you to believe that anyone who disagrees with you is simply misguided. Cod economics, ya da ya da.

I am going to explain the Econ101 version of free trade which has become a bit of an Econ101ism. A lot of people may roughly understand the arguments in favour of free trade but haven’t got the complete picture.

So, a tariff is just a tax on a good that you import from another country. A tariff not only raises revenue for the government but also gives an advantage to home producers over foreign producers. Why does this happen? Let’s take a simple example.

You are in the UK and want to buy some chocolate. You see that the UK and US make similar quality* chocolate and are available at the same price, so it’s hard to decide which to buy. If, however, the UK imposed a tariff on chocolate coming into the country, then US chocolate would now be more expensive. The decision is easy, you buy chocolate made in the UK as the price is lower.

When governments put a tariff on imports like this, it is thought of as protecting home producers - hence the term protectionism.

So why is this a problem? Well let's say that US firms find a new way of making cheaper chocolate via some nuclear reaction or whatever. US chocolate would now be cheaper than the UK if it wasn’t for the tariff. What this means is that consumers in the UK are going to lose out (this is why some people think Brexit will mean cheaper food prices).

But this is not the main compelling argument for free trade. Reducing tariffs means that the whole of society gains by more, on average, than under tariffs. Tariffs impose what is known as a dead-weight loss on society. We can prove this with lots of nice graphs that involve little triangles. The upshot of all this is that even though UK chocolate makers may gain from tariffs, the overwhelming majority of people lose from them. In fact, because there is a net gain from free trade, the winners can compensate the losers – everyone wins.

And because we can rework this example from a US perspective, the same logic applies to the US. As the logic for free trade is undeniable, both countries sit down and agree not to impose tariffs over a cup of tea and it will be the easiest deal in history…

There are a number of important criticisms of this theory that are not as widely known as the above. Not least, the idea that the winners compensate the losers has not really happened in practice. This is related to the whole globalisation and inequality issue. But this is not what I am going to focus on as I want to talk about why trade deals are not actually so easy.

Tariffs are probably the most conceptually obvious way in which you can prevent free trade. But, they are not the only way.

Subsidies are another way you can distort the process of free trade. A subsidy is the opposite of a tax. Instead of taking away, the government gives. For example, rather than imposing a tariff on US chocolate, the UK government could subsidise UK chocolate. This would allow UK firms to charge a lower price than US firms, giving them a competitive advantage. Even though those subsidies** would actually give us cheaper chocolate than putting a tariff on US chocolate, we are going to have to pay higher taxes to fund those subsidies. So there is still a deadweight loss (despite chocolate lovers gaining).

Regulations are also another example of distortions. If the UK allows the use of less expensive graphite tips in their nuclear chocolate reactors and the US doesn’t, then the UK has a competitive advantage over the US.

Now at this point, you may be thinking “isn’t government regulation a market distortion in itself?”. You would be correct in thinking that. This was seen as a benefit of Brexit, to be free from the red tape of Brussels.

This, however, is where trade deals get complicated. This is because regulations are what sovereignty is all about. What is a law other than a regulation? One person's red tape is another person's necessary safety measures. You can make your own regulations that are different from other countries, but if this gives you an artificial competitive advantage over other countries, then you shouldn’t be surprised if that country won’t sign a trade deal with you.

To put it simply, there is a trade-off between sovereignty and free trade. 

You can’t have your chocolate cake and eat it too. This is literally baked into free trade theory. However, when you learn the basics of free trade you just assume (for pedagogical purposes) that the other country has the same preferences as yours. 

This does not mean, however, that Brexit was a bad thing. If the UK has different preferences to the rest of the EU then it makes sense to sacrifice some wealth (via trade) to satisfy those different preferences. The problem, however, is that many people who voted to leave not only had different preferences from the EU, but also different preferences from each other. Some wanted more protectionism/regulations, whereas others wanted less.

When the UK was inside the EU, they had a say in what regulations were imposed, but other countries could also influence these regulations. As the UK leaves, it can impose its own regulations, but other countries are still going to influence these regulations via trade deals.

You can’t really escape the fact that if you want to trade, and preferences differ, you are going to have to find some way of compromising over these regulations.

 The trade-off is real. This is why, sadly, it wasn’t so easy and was never going to be.

*If you are from the UK and have ever tried a Hershey’s kiss, this quality analogy might be a bit of a stretch. Perhaps this is why the US needs so much ice if they have to put wax in their chocolate to stop it from melting.

**The EU does actually allows a certain level of subsidies (or state aid). The crucial point though is that the rules have to be the same for everyone or else there is a risk of other countries having an unfair advantage.

Thursday 10 December 2020

An economist's guide to Christmas (not).

After discussing the idiosyncratic way I buy presents (more of which later) with Tom Chivers, he said: “An economist's guide to Christmas would make a good book title”. To which I sent him back a vomit emoji (Tom and I are actually writing a book together that doesn’t actually make me want to vom).

I am a little weary of pop economics advice on how to improve your life. I think sometimes the advice is a bit of a stretch from what economic models or empirics tell us.

For example, if I were to write a book like this, I could point to evidence that finds that we tend to overvalue the gifts we give others. Or perhaps highlight the fact that people would not pay as much for the gift they are given if were they to buy it themselves. I would then triumphantly argue we should just give people money instead.

This is bad economics and bad advice. This reasoning doesn’t take into account the warm glow you feel from giving the gift or the fact that someone went to the trouble of buying you a gift makes you happy. After all, isn’t this the reason gifts exist in the first place?

If you were to take anything from this, it suggests that giving a gift that is difficult to put a direct value on may be worthwhile – a homemade gift for example. But it depends on lots of factors which I am sure you already consider when giving gifts such as… do you think they will like it?

Let's be honest - we have all received gifts that we have been disappointed with. I remember my Dad once told me about the time my Grandfather gave him some sort of electronics set for his 18th birthday. My Dad recalled thinking at the time “does he even know me?”. This is probably why giving a gift can be so stressful, the thought that the other person won’t like it and think badly of you.

I think the old saying of “it is the thought that counts” is extremely important here. If you accept that giving gifts is a good thing and want it to continue, you also need to accept that people are going to get it wrong occasionally: it doesn’t necessarily reflect how they feel about you.

So how do I give gifts? Well I really like buying gifts for people. But the way my wife and I give gifts to each other is as follows: we don’t. Well, strictly speaking, this isn’t true. If we find something nice that we think the other will like, we buy it (recently, my wife bought me Dirt, a fantastic book about a journalist training to be a chef in Lyon and I loved it).

However, we worked out that birthdays, anniversaries, and Christmases amounts to 3 gifts a year, each. Given our average life expectancies (and marriage expectancy?) we are looking at well over 200 gifts. Buying one, thoughtful gift for someone is hard enough. Repeating the process every few months makes it ever more difficult, so we decided to stop.

We also have an aversion to accumulating physical stuff (despite my love of kitchen gadgets). So instead of buying each other stuff on special occasions, we tend to just go to restaurants or visit places to celebrate. But when we do get each other gifts, we are usually really happy with them and it removes the stress involved with time constraints of birthdays, etc. It also has the added bonus of being a surprise!

However, and this is the crucial thing here, I AM NOT ADVISING YOU TO DO WHAT WE DO. If you enjoy giving and receiving presents with your partner, or anyone for that matter, continue doing so. If you read this and think you might like to do the same, great. If not, also great!

In economics, we often model decisions as utility maximisation (basically, doing what makes you happiest). But what makes you happy is down to your preferences which are extremely difficult to change. Although it may be the case that you just don’t know until you try, if you are happiest in what you are doing, then keep on doing you. Oh and if do want to buy someone a present for Christmas, buy my book.

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