Culinary experiments, CPI and substitution bias

Aiding the substitution bias

Though this posting is about a culinary experiment, it will be useful to explore some terms connected with economics, to put this culinary experiment into the context of economics, or more aptly, home economics.  Every month, there will be reports in the news media about consumer price index (CPI).  In simple terms, CPI is a measure of the price of goods and services in an economy and by tracking the CPI, one will be able to gauge the level of inflation/deflation in the economy.  As a rule of thumb, policy makers in governments like CPI to be positive and consumers like the CPI to be negative.

When the CPI is positive, inflation is operating in the economy, goods and services become more expensive, or the currency loses value.  Since almost all of the currencies in existence are based on debt, when a currency loses its value, it becomes cheaper to service the debt.  Consumers on the other hand, like the CPI to be negative.  This means that the price of goods and services are falling and the currency in their pockets is increasing in value.  This state of affairs is often referred with the dreaded word, with a capital D; Deflation.  Central bankers all over the world will start rubbing their chins in deep anguish, when they see CPI is consistently negative in their economy.

Let us do a thought experiment.  Suppose you like apples and oranges, equally.  And suppose you buy apples and oranges in equal volume, every week.  If the price of apple starts to rise, you may initially ignore the price differential and continue your regular purchase.  However, if the price rise becomes substantial, you will buy less volume of apples and more oranges.  At some point in the upward trajectory for the price of apples, you may stop buying apples completely, and be satisfied with oranges alone.  You are unlikely to be displeased; remember that you like apples and oranges, equally.  If the CPI was calculated with equal allotment for apples and oranges, it would show a rise in the macro-world.  In your micro-world though, there is no change in the CPI as you have substituted apples for oranges.  The rise in macro-CPI shown is what economist call, “substitution bias,” meaning that the actual CPI is less than what is commonly reported.  This topic has been a subject of much study and policy wonks gets a Pavlovian response of uncontrolled blathering at the very mention of the phrase substation bias.

The book, A Short Course in Culinary Experiments, comes with an inbuilt substitution bias.  I wish I could claim that this was by design, but it was not.  In the book, you are first given basic template for the preparation of a dish and then I ask you to do variations and experiments, to suit your taste.  In this framework, there are not many “must have” items in the ingredients list.  The practical effect of this is that the readers will substitute ingredients with items that are at hand or cheaply available.  Obviously, you can’t find a substitute for everything (even the government agency agrees with this point on their CPI calculations) and as long there is no food shortage, you will be able to see items with great elasticity in prices, which you can use to your advantage.


Change in consumer price index (CPI)

The chart above (courtesy of; source is here) shows the change in CPI for the US since the year 2000.  You will be able to see that inflation is alive and well for all components of CPI, except for apparel.  If you are a parent with college-bound offspring, you will not be pleased to see the last item on the chart.  Food prices went up by over 43%, and this you would understand was a macro trend.  From my experience, the food prices did not go up by 43%, primarily because of substitution of items.  In Baltimore, in the last few weeks, I noticed that the price of cauliflower has gone up by over 250% while that of greenhouse-grown tomatoes have fallen by 50%.  This is when you think of all the clever culinary experiments you can do, with greenhouse-grown tomatoes.

One item that I found to be ideally suited for substitution is green peas; dried green peas to be specific.  You can buy dried green peas from Indian/Asian grocery stores in bulk (4 to 8 lb bags).  Take 1 cup of dried green peas and add 4 – 5 cups of water.  Allow it to sit for 24 hrs.  The green peas will absorb water and swell.  It will swell to about twice the original volume.  If you are calculating by weight, the weight will have doubled as well.  You can drain the water out, rinse it well, and use it to prepare dishes that calls for frozen green peas.  For example, you can use this in the preparation of the dish P1 described in A Short Course in Culinary Experiments. You will find that the taste is comparable to the frozen peas, but the swelled peas are slightly harder to chew.  The cooking time will also be slightly higher.  If you usually blend peas into the dosa batter, (preparation ST11) you will hardly detect any difference between the swelled green peas and the frozen kind.

By my estimation, the price difference between the swelled version of dried green peas and the frozen variety is close to 300%.  I suspect that the price difference is because of the higher input costs for the frozen green peas.  You can easily see that the net energy required for the product, from the farm to the kitchen table, is considerably less for the dried variety of green peas.  For frozen peas, think of the energy use for the refrigeration process, transportation and storage in the refrigerated state, up to the super market, and then, in your kitchen.  If you have not heard the term “carbon footprint,” perhaps you can look it up here.  In this context, the dried peas have a lesser carbon footprint than the frozen variety and justifiably, a lower price.  If your diet is predominantly based on grains and vegetables, you are already doing a great deal to reduce your carbon footprint (a cool calculator is here).

In health food stores (and in some online stores) you will find an item called, 100% vegetarian-friendly protein powder, or sometimes called as pea protein.  This is nothing but powdered green peas, usually with some flavoring, to make it suitable for making a drink.  The price difference between what you can buy in Indian grocery stores in bulk, and the nicely packaged protein powder – weight for weight – is over 1100%.  This is likely to be the best substitution that you can make, as far as protein supply is concerned.  If you have discovered some nice substitutions in the course of your culinary experiments, please report them on the comments section below, or you can write a post of your own.

To get the e-book of A Short Course in Culinary Experiments, click here for the Amazon Kindle Store.

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