Good morning.

My "Back in Business" history column last weekend, An Old Way to Fight Inflation Gets New Fans, explored past attempts to impose price controls.

I wrote:

The conventional wisdom that price controls have always failed is a myth. History shows that they have often been surprisingly effective as temporary measures in urgent crises—such as World War I and World War II.

Reader Hugh Kelleghan spoke for many others when he emailed, "price controls never (ever) 'work' against inflation." The most commonly capitalized version of this response, from several readers, was: "Price controls have NEVER worked."

One of my principles, in reporting and in life, is to use the word "never" as seldom as possible. (I don't like "always" either.) After all, it takes only a single exception, from any time or place, to falsify any assertion that something "never" worked or happened.

And the historical evidence on price controls suggests they worked quite well during World War I and World War II:

The Lever Act, which became law in August 1917, enabled federal agencies to control the prices of food and fuel. Inflation fell sharply after that.

As you can see, price controls imposed during World War II also helped take a big bite out of inflation.

However, almost no one argues that price controls should be permanent, and here you can see why: Easing them can release pent-up demand at a time when supply is still tight. In 1946 and beyond, inflation shot up as what economic historian Hugh Rockoff calls the "drastic regimentation" of price control was lifted.

Reader Mark Maisonneuve has a family reminiscence from that exact time that helps explain why price controls aren't sustainable:

In 1947 my maternal grandfather decided to take his family from Michigan to Florida to find new work as a mechanic. He and a friend both towed small trailers with the plan of living in a trailer park.... 

The trip was delayed when the other guy ruined a tire and they had to wait several days while one was requisitioned with the permission of the [price] control board -- two years after the war was over.

I can imagine the only two people who would like to see this kind of scarcity return to America are Putin and Xi.

This seems like a good time to launch a new feature on Wall Street words.

I'm a firm believer that learning about a word's origins can give us deeper insights into its meaning.

As I recently pointed out, the word capital is derived from the Latin caput, or head. Wealth in ancient societies was measured in head of livestock, a mobile form of money.

Embedded deep in the word capital is the idea that it isn't fixed or permanent; you must tend it, as good farmers tend their cattle. And you'd better use your head if you want to succeed at that.

So where does the word inflation come from?

It's derived from the Latin root flāre, "to blow," from which we also get the word flatulence. To this day, the medical term for passing gas is "flatus."

According to the excellent Online Etymology Dictionary, inflation entered English in the mid-14th century to describe a "swelling caused by gathering of 'wind' in the body; flatulence."

A pamphlet published in 1676, titled A New and Needful Treatise of Wind Offending Mans Body, helpfully offered that if you drink "old Ale that is clear, well boiled and well malted...then you need not so much fear inflation by wind."

In both the Netherlands and England, inflation and flatulence were intimately associated with the puffing up of stock prices, as this close-up of an engraving from The Great Mirror of Folly, a book about the speculative bubbles of 1720, demonstrates.

The two figures shown here are quite literally inflating the market; in Dutch, such practices were called windhandel, or "trading in wind."

The stench of indigestion still clung to the word inflation in 1755, when Samuel Johnson defined it this way:

In 1764, inflation was just a kind of intestinal uproar that you could silence with a cup of joe:

The Oxford English Dictionary says other early meanings of inflation were "the condition of being puffed up with vanity, pride or baseless notions" or expansion "beyond proper or natural limits."

The use of inflation to mean an escalation in prices doesn't seem to have arisen until the 19th century.

It was, perhaps unsurprisingly, American politicians who stripped inflation of its associations with stinky behavior and normalized it as a proper function of government.

In one of the early uses of the term in a financial sense, Sen. John Davis (Mass.) asked on Jan. 23, 1840, whether an excess of monetary supply could be anything "more than an occasional occurrence," adding:

All money, metallic as well as paper, does and will fluctuate in value, and if this be inflation, then gold and silver is no more exempt from it than paper.

As soon as politicians got hold of the word inflation, they started inflating it. By papering over the origins of the word, they gave it a false intellectual dignity. We'd all be better off if everyone remembered that, at its heart, inflation is a fart.

This week in 1973, The Wall Street Journal introduced readers to a startling new idea: index funds.

Academic researchers and a handful of investment firms, led by Batterymarch Financial and divisions of Wells Fargo and American Express, were enthusiastic.

But most asset managers were scornful:

To me, the only thing more remarkable than how ridiculously wrong the critics of index funds were is how long it took for most investors to realize it.

I include myself among those slow learners.

I first met Jack Bogle, founder of Vanguard Group and father of the index mutual fund, in 1993. He told me that someday index funds would surpass actively managed funds in size. I still remember what I blurted out: "That's impossible! It'll never happen."

As I mentioned above, I've since learned that it's a good idea to use the word "never" as seldom as possible.

Among stock funds, indexing has already surpassed active management in size, and among all stock and bond funds it almost certainly will soon.

Be well and invest well,

Jason

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A nickel ain’t worth a dime anymore.
—Yogi Berra