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The Keynes and Hayek Rap

Sunday, January 31, 2010

If you havent watched this yet, do give it a go!  A tremendous reaction amongst the Economics teacher community about this very funny rap on Keynes versus Hayek! Your students will love this!

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Revision presentation - fixed and floating exchange rates

This updated revision presentation explains the difference between fixed and floating exchange rates.

Launch revision presentation on fixed and floating exchange rates

Download printable handout (pdf) of presentation slides

Get interactive with the US Economy

Saturday, January 30, 2010

You’ve just got to love interactive graphics like this one.  Updated every month, this looks amazing on an IWB too.  A nice touch - top right hand corner provides a brief explanation of the economic data variable being charted.

Macroeconomics seminar with Andrew Sentance

Friday, January 29, 2010

On Thursday 11th February the Keynes Society hosts Dr Andrew Sentance from the Monetary Policy Committee of the Bank of England for a one hour seminar on the current state of the UK economy and prospects as we head into 2010. Colleagues who wish to come along and perhaps bring some of their students are very welcome. We are not ticketing this event. Later on the same night (8-40pm) the Entrepreneurship Society hosts Tony Fernandes, Founder and CEO of Air Asia. So there is the chance for a double-header (this meeting is being ticketed as we expect to be full). Please .(JavaScript must be enabled to view this email address) if you are considering coming along.

The end of an era for a public good - and economics textbooks?

For years, lighthouses have been given as a classic example of a public good – their beaming lights are non-rival, as one ship benefitting from them doesn’t diminish their usefulness to all other shipping, and non-excludable, as their benefits cannot be reserved only for those who have contributed to paying their costs. It would be almost impossible to avoid the free-rider problem (although enterprising students often try to come with suggestions for this). And it would be very difficult to charge each beneficiary for their use of the light, so there is little possibility of running them at a profit.

Many economics textbooks have illustrations to demonstrate this, some with delightful photographs of lighthouses and others with diagrams illustrating the non-rival and non-excludable nature of the beam of light. They have therefore been very useful to economists as well as to shipping, as good examples of pure public goods are very hard to find – but they are about to disappear.

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Revision Presentation - A Question of Confidence

This new revision presentation examines the implications of changes in consumer and business confidence for the UK economy

Launch revision presentation on a Question of Confidence

Download printable slide handouts

Uh oh… S&P frowns again at the UK…

Thursday, January 28, 2010

The news that the biggest credit ratings agency, Standard & Poor’s, announced yesterday that they “no longer classify the United Kingdom among the most stable and low-risk banking systems globally” sent sterling down, and does not bode well given Greece’s recent experience.

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Decision Time (Radio 4) - Government intervention and binge drinking

A hat tip to Anne Logan from Methodist College Belfast for spotting this topical and highly relevant Radio 4 discussion - How would controversial proposals to tackle binge drinking fare in Whitehall? Anne recommends the first half of the programme as an excellent basis for discussion of government intervention and failure. The programme archive is here.

Making trainers in the UK? How to compete with the world

A cross posting from Jim

This has to be one of the best short business videos ever produced by the BBC. The New Balance factory in Cumbria is quite different.  It makes running shoes and other trainers to compete with the low labour-cost factories in the Far East.  The 2 minute video highlights some really important points about how it competes effectively. 

Here is the video

Terrific stuff.  Some possible follow-up or discussion questions below:

- Why does the New Balance factory need to undertake a “relentless search to boost output & improve productivity”
- What is meant by contiunous improvement?
- “If you love your job, it goes a long way to making people good workers” according to Billy Edgar.  To what extent do you agree with this view?
- Evaluate the importance of location to the success of the New Balance factory
- New Balance wants to triple the factory output from 1 million to 3 million pairs of trainers per year.  Outline the main challenges New Balance will have to overcome if they are to achive this objective

EBEA - corrective surgery?

Great stuff from the EBEA ‘newsletter’ which pinged its way into my inbox this morning. Their annual conference has a session on Corrective wikis and the supporting blurb has a memorable opening line - “many of us will be familiar with Wikipaedia, wikis are a great way to help students ‘peer review’ whilst assessing their own understanding and attention to detail. I am pretty sure it is a deliberate mistake! But with the EBEA you never know!

Apple’s Revenues

A stunning and clear illustration here of the surge in Apple revenues and the component parts. An entire ico-system has developed around the Apple suite of products. In the final quarter of 2009:
Revenues $15.7Bn
Profit $3.3Bn
3m Macs sold
9m iPhones
21m iPods

And now the iPad .... kindling for the Kindle.

A Breathtaking Bridge

It is the type of infrastructure project whose ambition and scale takes the breath away - this Independent article looks at the start of construction work for 30-mile Hong Kong-Zhuhai-Macau Bridge, which will link China’s southern economic hub of Guangdong province to Hong Kong and Macau.

Assorted Links (27 Jan 2010): Focus on poverty and inequality

Wednesday, January 27, 2010

There has been a fresh series of reports on the scale of relative poverty in the UK. Here are some relevant links:

1/ BBC news video: Divide between rich and poor ‘wider than 1970s’

2/ Guardian: 2 million pensioners live in poverty

3/ Guardian: Unequal Britain: richest 10% are now 100 times better off than the poorest. 1980s income gap still not plugged, say analysts

4/ Independent: On the right and right-on: a portrait of Britain today

5/ BBC news: Save the Children says severe child poverty ‘going up’

2009 - a desperately difficult year for airlines

This BBC news article highlights some of the key economic challenges facing the global airline industry as we move further in 2010. IATA reports that world airline passenger traffic dropped by 3.5% from a year earlier, while freight traffic fell 10.1% as the downturn hit demand. Losses have mounted and the industry continues to have to weather many uncertainties such as the likely strength of a rebound in global tourism, freight and business travel and the volatility of aviation fuel costs. This in the week when Japanese Airlines filed for bankruptcy. IATA has forecast that airlines will lose $5.6 billion (£3.5 billion) on a net basis this year after losing $11 billion in 2009.

Revision Presentation - Housing & the UK Economy in 2010

Tuesday, January 26, 2010

This new revision presentation examines the links between the housing market and the UK economy.

Launch revision presentation

Download printable slide handout

Recession in the major economies - from peak to trough

An interesting graphic in the Economist looks at the total change in GDP during the 2008/2010 global recession for a selection of major economies. The chart shows that Britain’s slump was not nearly as deep as Japan’s, where GDP contracted by 8.6% from peak to trough.

A good graphic to post up on the IWB

UK economy back to growth (just!)

There’s a video discussion here at the on the UK’s climb out of the longest recession since WWII. Whilst the UK economy finally returned to growth in the fourth quarter of last year, it was at a far weaker rate than expected.

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Low pay, discrimination and monopsony power in the labour market

As part of our A2 micro course we are looking at aspects of labour market failure at the moment and today we cover discrimination in its different guises and the issue of possible monopsony power and wage exploitation. Here are some links to BBC news resources on this topic including some useful video clips

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Focus on the National Minimum Wage

Sunday, January 24, 2010

This blog provides some updated links on the minimum wage - a government intervention in the labour market.

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Assorted Links (24 Jan 2010) Prospects for the UK Economy

In the week ahead, official data is likely to herald an end to the recession purely in terms of quarterly changes in national output. But the macroeconomic situation remains highly uncertain with plenty of risks and potential pitfalls ahead. Here are five links on related issues:

1/ BBC news: Ernst and Young warns UK firms of ‘bumpy ride’

2/ Independent: Back from the brink? Green shoots of recovery

3/ Observer: UK exports ‘dropped by more during recession than in any other slump’

4/ Guardian: The recession should be over soon but happy days are a long way off

5/ The Scotsman: Why the Bank of England’s credibility is on the line

And now here is the inflation weather forecast…

Weatherman John Kettley provides an inflation weather forecast at the start of this super four-minute audio clip on why economists, just like weather forecasters, get a lot of flack when they get things wrong.

Launch audio clip on inflation forecasting

Warner on merger motivations and shareholder value

This is a cross posting from Jim over at Business Studies. There is much overlap between A2 business economics and the focus on strategy for BUSS 4. The Kraft-Cadbury takeover bid provide rich pickings.

Jeremy Warner (formerly of the Independent) is well worth reading in the Telegraph each day.  And he has written a timely piece on the likely result of Kraft / Cadbury takeover.  Who are the likely winners from the deal? Nestle & Mars (who will probably gain market share as Cadbury struggles to come to terms with the new culture of Kraft) and the investment bankers and lawyers who have billed many millions of fees from the prolonged takeover battle.

There are some great quotes in Warners article.

I particularly liked this one:

“Most mega mergers are more the result of executive boredom, delusions of grandeur and the siren call of fee hungry investment bankers than compelling industrial logic”

Warner goes on to list some good examples for students of major acquisitions (often dressed up as “mergers”) which have gone on to destroy huge amounts of shareholder value.  Well worth reading and possibly printing out for students to use at the start of a lesson on external growth strategy

Graphic on environmental performance

Might have some value when introducing aspects of environmental impact. The Environmental Performance Index – developed by scientists at Columbia and Yale – aims to aggregate various countries’ performance across environmental indicators, and give each an overall mark out of 100.

Find a stock market game that works

For some time I have been searching for a real time stock market trading game that works, one where 99% of the hard-graft is done by the software rather than teachers having to input every change. And also one that is intuitive to the students and which gives them a full array of trading options. VSE Marketwatch has provided a neat solution and within a week of a launch, 152 teams of Year 10 and Year 11 students are trading away in our 2010 stock market competition.

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Call to scrap the MPC

Saturday, January 23, 2010

David Blanchflower argues in this interview on the Radio 4 Today programme that the Bank of England acted too late during the financial crisis and may be on the threshold of making similar errors in setting policy rates in 2010. he suggests that the MPC is not fit for purpose and that a change in target is called for. But he doesn’t explain clearly what should take its place. So students will get something from this piece but are left unfulfilled. John Humphries should have pressed Blanchflower further.

Unearthing the ratings agencies

I used this video piece by Newsnight’s Paul Mason in my A2 macro class today. It was a useful follow up to a presentation last night by Jon Moulton who was decidedly pessimistic about the risks facing the UK economy from the mountainous corporate, household and public sector debt. Paul Mason meets a couple of the people working for the ratings agencies who may decide sometime this year to downgrade the UKs triple A rating on sovereign debt. But the head of securities risk at HSBC claims that the markets have mis-priced the risk of the UK government defaulting on its new debt. The UK has never missed a coupon payment and there is a strong underlying demand for new bond issues. We covered the bond market in a recent Google wave.

China the hungry teenager

Hamish McRae is on excellent form in this piece in the Independent - China’s latest growth surge is the result of an enormous fiscal stimulus and a massive (and unsustainable) rise in credit.

One of the short term consequences is that China’s turbo-charged growth is once again putting upward pressure on world commodity prices. Just as a hungry teenager will happily eat food long into the night, China’s incremental demand for natural resources and manufactured components is threatening another rise in cost push inflationary pressures in the world economy. This is one of the inflation risks facing developed countries and a factor behind fears of a rise in short term and long term interest rates before a recovery gains sufficient traction.

Focus on the BRICs

Thursday, January 21, 2010

The following video clips from the FT focus on the so-called BRIC economies (coined by the Chief Economist at Goldman Sachs in 2001).
There are excellent to provide discussion points on why grouping the BRIC (Brazil, Russia, India, China) economies together is flawed,  with the 4 countries being actually very different and the acronym BRIC no longer being appropriate, in its description of their experiences or their futures. They also discuss whether economic power has shifted from the US to the East.

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Unemployment falls - but who deserves the credit?

Stephanie Flanders on top form here, discussing who deserves the credit for the recent surprise fall in unemployment figures announced this week.

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Bond bubble

Following on from the G-Wave on the bond market, the FT’s John Authurs analyses the market here.

Assorted Links (21 Jan 2010) - Focus on Unemployment

The small (and unexpected) fall in unemployment was headline news yesterday but if you scratch beneath the surface the main explanation for the decline centred on rising part time employment and a further increase in long term youth unemployment. Economic inactivity continues to grow. Here are five links (including some BBC video coverage) of the unemployment data.

1/ BBC News (Stephanie Flanders) - Surprise fall in unemployment - see also her blog

2/ Statistics Commission - latest UK labour market data

3/ Telegraph - UK unemployment expected to rise again this year

4/ Guardian: Part-time working surges

5/ Independent: Fall in official unemployment rate masks rise in the ‘hidden jobless’

Chinese growth in words and pictures

Statistics about the speed of China’s development never cease to be amazing, no matter how many times you read them. Here is another one; in the dark days of 2009 the Chinese economy grew by yet another 8.7% (10.7% in the final quarter of the year) so that it is now set to overtake Japan, which probably shrank by 6% over the same period, to be the world’s second largest economy. And yet, according to Ma Jiantang, head of the National Bureau of Statistics, there are still 150 million people in China living on $1 a day and so poor according to the UN’s standard rating. This gives a remarkable contrast as the world’s second or third largest economy is also a developing nation with enormous conflicts and trade-offs in macroeconomic policy to resolve. Mr Ma also referred to the concerns about inflation in China - he said price rises were “mild and under control”, but over recent days the government has tried to limit the amount of loans made by the country’s banks in order to avoid a ‘domestic bubble’ of growth. This is the focus of the Times’ report, which highlights expectations that there may be a rise in interest rates in China in the next two months.

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Wednesday, January 20, 2010

A terrific interactive diagram from the Guardian showing the market shares in the world confectionery market.

50-year decline in housing affordability

The BBC website has a summary of the key points in a report issued by the Halifax about the housing market over the last 50 years. The main headline is that houses have become less affordable, with the average annual price rise of 2.7% outstripping the 2% annual rise in incomes over the period. There have been 4 periods of boom in house prices: 1971-73, 1977-80, 1985-89, and 1998-2007, with the greatest acceleration in the last decade. In 1959 the average house cost £2,507 (compared with an average price in December 2009 of £162,103 according to Nationwide Building Society) and about 14% of them did not have an indoor toilet (compared with 0.2% in 1996). In 1967 22% of houses did not have a basic hot water supply, and built-in central heating was a rare facility.

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Assorted Links (20 Jan 2010) - Five new economics books

Tuesday, January 19, 2010

A selection of new books on business and economics

1/ The Cartoon Introduction to Economics: Microeconomics v1 - Grady Klein and (stand-up economist) Yoram Bauman

2/ What Works: Success in Stressful Times - Hamish McRae - a superb set of twenty case studies

3/ How Markets Fail: The Logic of Economic Calamities - John Cassidy

4/ This Time is Different: Eight Centuries of Financial Folly - Kenneth Rogoff

5/ Economic Naturalist’s Field Guide: Common Sense Principles for Troubled Times - Robert H Frank

Assorted Links (19 Jan 2010) - Focus on the Chinese Economy

1/ Telegraph: Something has to stop the Orient express and its cargo of trade imbalances - Roger Bootle argues that China must do more to reduce the soaring trade imbalance between China and the rest of the world

2/ The Observer: Dark economic clouds on the horizon for China - Heather Stewart looks at the risks facing the Chinese economy in 2010

3/ The Times: After £800bn loans, China tells banks to focus on the real economy - Unprecedented lending growth risks causing a bubble economy and rampant inflation.

4/ The Guardian: Without Chinese economic reform, global recovery may be doomed - Larry Elliott argues that China needs to boost domestic consumption rather than relying on exports, or the world will be flooded with goods that nobody wants

5/ Independent: China ‘overtakes’ Germany to become largest exporter

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Inter-related economic risk map

Monday, January 18, 2010

A hat tip to Edmund Conway from the Telegraph for spotting this. This is excellent for identifying some of the external risks / shocks that affect national economies and could be useful for A2 macro students.

tutor2u Economics Resources for Spring 2010 - Order Form

We’ve had several requests today from centres wanting to upgrade and/or update their departmental resources with our popular range of digital course companions for AS & A2 Economics.  Chrissie has put together a revised order form for the most popular digital economics materialsm, including OCR Unit F585 Pre-release June 2010 for which she is now taking pre-orders.

The digital courses companions make a really cost-effective and revision-friendly addition to the departmental materials.  Our network licence pricing means that you can copy the materials to all your class sets, in various formats.  A great way of boosting their study materials as the important Easter term picks up teaching intensity.  Here is the link:

Download tutor2u AS & A2 Economics Resource Order Form - Spring 2010

Fly in the ointment for export-led growth

David Smith’s weekly Economic Outlook in the Sunday Times focuses on the prospect that recovery from the recession will come from exports. He suggests that the conditions needed are in place – sterling is a significantly more competitive currency than was the case 18 months ago, there is strong recovery in world trade which is likely to last into 2011, and there is no wage inflation to spoil the competitiveness of UK export prices. The Ernst and Young Item club’s predictions for the economy over the next ten years, to be published today but much trailed through the media this weekend, will suggest that although the domestic economy will struggle to produce enough consumer demand to stimulate growth - debt-laden consumers have to recover from the shock of repaying some of their borrowing before they are prepared to spend so heavily again – growth in exports will be strong, with figures of 9%, 9.5% and 8% growth predicted for 2011 to 2014. If consumption is indeed sluggish at the same time, we can hope that imports will not be growing as fast, so that the figure for net exports improves, allowing Aggregate Demand to grow and some recovery of output to become established.

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Assorted Links (18 Jan 2010) - Focus on Interest Rates

Sunday, January 17, 2010

1/ BBC news video - UK interest rates could stay low for five years - One of the UK’s best known economists, Roger Bootle, predicts that interest rates will stay below 1% for the next five years

2/ Telegraph - Economists question success of Bank of England’s £200bn money-printing plan - Economists have cast doubt on whether the Bank of England’s £200bn quantitative easing (QE) programme is working

3/ Telegraph - Why the Bank of England will raise interest rates as deflationary threat melts away -  despite massive amounts of Quantitative Easing (QE) in both the US and UK. It is surely only a matter of time before short-term rates follow suit. Or so you would assume

4/ Guardian - Too dangerous to raise interest rates yet - Setting interest rates is a dangerous game - and one that could choke off recovery

5/ The Times - Profile of Willem Buiter - Maverick laughs all the way to the bank - More booms and busts lie in wait, economist Willem Buiter predicts.

TV price war begins…

The Telegraph reports on the news that the cost of watching live football and cricket is to be slashed in a price war.

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Is hitch-hiking the most carbon efficient form of transport?

Justin Rowlatt from Newsnight thinks it might be - with a little help from Simon Calder of the Independent and the team at More or Less - more here

Assorted Links (17 Jan 2010) - Business Economics

1/ Sunday Times - BBC forecast for Met Office: changeable - a contestable market? The Met Office has in-built advantages but seems to be riddled with inefficiences and higher costs

2/ Independent - Facebook enters partnership with free McAfee deal - a good example of a joint venture, imperfect information and the freemium business model - almost half of internet users do not have adequate virus protection

3/ BBC news - Kraft ‘must increase its Cadbury takeover offer’ - the ongoing takeover battle for Cadbury, 45% of which is already owned by US investors!

4/ Telegraph - Starbucks looks beyond US for instant result - the fortunes of Stabucks seem to be improving, it has less than 10% of the US coffee market and must look overseas for more rapid growth

5/ BBC - Fred the Shred gets a new job - ironic that Goodwin is advising the architects RMJM which were behind the overdue and 11 times overpriced Scottish Parliament

Revision Presentation - Supply of Labour (A2 Micro)

Saturday, January 16, 2010

This revised and updated revision presentation is designed to take A2 economics students through the key issues in relation to the supply-side of the labour market.

Launch revision presentation on the supply of labour

Download printable revision handout (pdf)

Hundreds of jobs lost as Bosch moves from Wales to Hungary

Friday, January 15, 2010

The Bosch Group - a privately owned German multinational manufacturing business has announced the closure of it’s car parts factory in south Wales with the loss of hundreds of jobs. With 900 jobs going at the factory itself, the final scale of extra unemployment will be significantly higher because of the negative multiplier effects for the local and regional economy.

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Severe doubt over Greeces economic figures

Thursday, January 14, 2010

Collecting accurate economic data can be a Herculean task at the best of times, but this week’s revision by Greece of its 2009 budget deficit from 3.7% of GDP to 12.5% is taking this to its extreme. This places Greece’s deficit well above the 16-nation eurozone ceiling of 3%, whilst its debt:GDP ratio is 113% - more than double the eurozone limit of 60%.

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4 Conditions needed for recovery

Eric Daniels, the Chief Executive of Lloyds Banking Group, writes in The Times today about the conditions needed to allow the economy to recover this year and next. He identifies three possible scenarios – strong recovery throughout 2010 and 2011, in line with Pre-Budget Report predictions and the Bank of England’s Inflation Report, with growth achieving up to 3% by the end of 2011. Or, more gentle recovery through this year followed by sluggish growth, which he says is consistent with recovery after a financial crisis – this reflects the expectations of Lloyds analysts. Finally the worst-cast scenario – fragile consumer and business confidence causing a double-dip recession, continuing lack of investment and growing unemployment preventing recovery this year.

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Assorted Links (13 Jan 2010) - Aspects of the Recession

Wednesday, January 13, 2010

1/ BBC News Hard Talk - Will 2010 see a shift in economic power to the East?

2/ BBC News - National Institute suggests that the UK recession is over see also The Times - Britain’s recession the steepest for 88 years

3/ Telegraph - Oxfam donations fall in recession

4/ Justin Wolfers / Freakonomics - In defence of GDP

5/ BBC news - German economy shrinks by 5% in 2009 - see also Latvian recession “worst in history” says economist

Bangernomics and asymmetric information


Another item from the Today programme relating to information was about MOT failure rates for cars and small vans, which have been published for the first time following a Freedom of Information (FoI) request by the BBC. Martin Rosenbaum, the BBC’s Freedom of Information expert, and James Ruppert, special correspondent for Autocar magazine and author of ‘Bangernomics’ discussed the data reluctantly published by the Vehicle and Operator Services Agency (VOSA). The agency had previously resisted publishing the data, saying it might be misleading – and I should think that it is likely to have an effect on the second-hand values of those models appearing at the top and bottom of the list. It may go some way toward balancing out asymmetric information in the market for second-hand vehicles, where the seller has more information than the buyer, thus distorting the price that they might arrive at between them for the vehicle.

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Alcohol information failure


Shadow Health Secretary Andrew Lansley was interviewed on radio 4’s Today Programme about the Conservative Party’s call for changes to labelling on alcoholic drinks. They say the current approach of using alcohol units is widely misunderstood, and want it replaced with centilitres. Mr Lansley identified the negative externalities associated with abuse of alcohol as costing £20bn to society, and said that the current system of information, printing the number of units contained in a bottle or can of alcoholic drink, did not allow the public to make decisions about how much to drink, as the implication is that one ‘serving’ of the drink is the equivalent one unit.

However this is often not the case – a typical glass of wine is between 1.5 and 2 units, and a pint of beer or lager can be more than two units, depending on the alcohol content of the brew. Instead the Tories would like to see the number of centilitres of pure alcohol shown on the label, suggesting that this would be easier for consumers to relate to the total amount they are drinking, rather like showing the amount of saturated fats in foods as grams, which are easier to assess as a proportion of the total food weight rather than showing the amount in calories.

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