الخميس، 9 أغسطس 2012

Leo Melamed: If it’s good enough for Milton

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Although I did not know it at the time, my first introduction to Milton Friedman occurred in 1940 when I was but seven years old. We were on the first leg of our escape from the Nazis at the outset of World War II and arrived from Bialystok, the city of my birth, to Vilna—that’s Vilnius, for those who don’t know the Yiddish name of this venerable Lithuanian city. My father, who was first and foremost a mathematics teacher, sat me down to provide my first lesson in economics. The circumstances made the moment historic and memorable. Years later, I had the privilege of relating this story to Milton and Rose.
In one hand my father held up a Polish zloty, in the other a Lithuanian lit. “Do you know what these are?” he asked? “Money,” I answered, proud to show off my deep understanding of such matters. “Yes,” he agreed. “And do you know how much each of them is worth?” I shrugged my shoulders, having exhausted my expertise in high finance.
My father then carefully explained that the value of those two units of currency could only be determined by what they can buy in the marketplace. What followed was my first exposure to the logic of Milton Friedman. I learned that while the official rate of exchange between the zloty and the lit was one for one, in fact it would take two zlotys to buy a loaf of bread but only one lit. “The government’s official rate doesn’t mean a thing,” my father admonished.
It was the start of our two-year odyssey, as my parents, with me at their side, miraculously outwitted the Gestapo and KGB in a danger filled escapade that spanned three continents, six languages, Japan, and happily concluded in the United States. The lessons in Milton Friedman’s free-market economics continued as we chased around the world, and as the lit changed to a ruble, the ruble to a yen, and finally a yen to a dollar. It left an indelible impression, one that resonated some thirty years later when I became chairman of the Chicago Mercantile exchange.

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