Step 1

Pat the beef dry and season with the salt and pepper. In a large Dutch oven or heavy soup pot, heat 1 tablespoon of the oil over medium-high heat until hot and shimmering. Brown half the meat in a single layer, turning with tongs, for about 5 minutes. Repeat with the remaining oil and beef. (To sear the meat properly, do not crowd the pan and let the meat develop a nice brown crust before turning with tongs.) Transfer the meat to a large plate and set aside.

Step 2

Add the onions, garlic, and balsamic vinegar; cook, stirring with a wooden spoon and scraping the brown bits from the bottom of the pan, for about 5 minutes. Stir in the tomato paste. Add the beef with its juices back to the pan and sprinkle with the flour. Stir with a wooden spoon until the flour is dissolved, about 1 minute. Add the broth, water, caraway seeds, paprika, thyme, bay leaf, and sugar. Stir with a wooden spoon to loosen any brown bits from the bottom of the pan, and bring to a boil. Reduce the heat to low, cover the pot with a lid, and simmer for 2 hours, stirring occasionally.

Step 3

Add the carrots and potatoes (if using) and cook, covered, for 1 hour more, until the broth is thickened, and the meat and veggies are tender. Fish out the bay leaf and discard, then taste and adjust seasoning, if necessary. Serve the goulash, garnished with fresh parsley and a dollop of sour cream, if desired. If not serving immediately, let it come to room temperature, and then store in the refrigerator until ready to serve.