Tulip mania or
tulipomania (
DutchDutch is a West Germanic language spoken by over 22 million people as a native language, and over 5 million people as a second language.
"1% of the EU population claims to speak Dutch well enough in order to have a conversation." Outside the European Union the number of second language...
names include:
tulpenmanie, tulpomanie, tulpenwoede, tulpengekte and
bollengekte) was a period in the
Dutch Golden AgeThe Golden Age was a period in Dutch history, roughly spanning the 17th century, in which Dutch trade, science, and art were among the most acclaimed in the world.- Causes of the Golden Age :...
during which contract prices for bulbs of the recently introduced
tulipA tulip is a flower in the genus Tulipa, comprising about 150 bulbous species, and in the family Liliaceae. The native range of the species includes southern Europe, north Africa, and Asia from Anatolia and Iran in the west to northeast of China. The centre of diversity of the genus is in the Pamir...
reached extraordinarily high levels and then suddenly collapsed. At the peak of tulip mania in February 1637, tulip contracts sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble (or
economic bubbleAn economic bubble is “trade in high volumes at prices that are considerably at variance with intrinsic values”...
). The term "tulip mania" is now often used
metaphorA metaphor is a figure of speech concisely comparing two things, saying that one is the other. The English metaphor derives from the 16th c...
ically to refer to any large economic bubble (when asset prices deviate from
intrinsic valueIntrinsic value can refer to:*Intrinsic value , of an option or stock.*Intrinsic value , of a coin.*Intrinsic value , in philosophy.*Intrinsic value , in philosophy....
s).
The event was popularized in 1841 by the book
Extraordinary Popular Delusions and the Madness of CrowdsExtraordinary Popular Delusions and the Madness of Crowds is a popular history of popular folly by Charles Mackay, first published in 1841. The book chronicles its targets in three parts: "National Delusions", "Peculiar Follies", and "Philosophical Delusions".The subjects of Mackay's debunking...
, written by British journalist
Charles MackayCharles Mackay was a Scottish poet, journalist, and song writer.He was born in Perth, Scotland. His mother died shortly after his birth and his father was by turns a naval officer and a foot soldier. He was educated at the Caledonian Asylum, London, and at Brussels, but spent much of his early...
. According to Mackay, at one point 12 acres (5 ha) of land were offered for a
Semper Augustus bulb. Mackay claims that many such investors were ruined by the fall in prices, and Dutch commerce suffered a severe shock. Although Mackay's book is a classic that is widely reprinted today, his account is contested. Many modern scholars believe that the mania was not as extraordinary as Mackay described, with some arguing that the price changes may not have constituted a bubble.
Research on the tulip mania is difficult because of the limited data from the 1630s—much of which comes from biased and anti-speculative sources. Although these explanations are not generally accepted, some modern economists have proposed rational explanations, rather than a speculative mania, for the rise and fall in prices. For example, other flowers, such as the hyacinth, also had high prices on the flower's introduction, which then fell dramatically. The high prices may also have been driven by expectations of a parliamentary decree that contracts could be voided for a small cost—thus lowering the risk to buyers.
History
The
tulipA tulip is a flower in the genus Tulipa, comprising about 150 bulbous species, and in the family Liliaceae. The native range of the species includes southern Europe, north Africa, and Asia from Anatolia and Iran in the west to northeast of China. The centre of diversity of the genus is in the Pamir...
was introduced to Europe in the mid-16th century from the
Ottoman EmpireThe Ottoman Empire or Ottoman State , also known by its contemporaries as the Turkish Empire or Turkey , was an empire that lasted from 1299 to November 1, 1922 The Ottoman Empire or Ottoman State (Ottoman Turkish: دَوْلَتِ عَلِیَّهِ عُثْمَانِیَّه Dawlet-il ʿAliyyat-il ʿOs̠māniyye, Modern Turkish:...
, and became very popular in the
United ProvincesThe Republic of the Seven United Netherlands was a European republic between 1581 and 1795, in about the same location as the modern Kingdom of the Netherlands,...
(now the
NetherlandsThe Netherlands is a country in Northwestern Europe, constituting the major portion of the Kingdom of the Netherlands. It is a parliamentary democratic constitutional monarchy. The Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east...
). Tulip cultivation in the United Provinces is generally thought to have started in earnest around 1593 after the Flemish botanist
Charles de l'ÉcluseCharles de l'Écluse, L'Escluse, or Carolus Clusius , seigneur de Watènes, was the Flemish doctor and pioneering botanist, perhaps the most influential of all 16th century scientific horticulturists....
had taken up a post at the
University of LeidenLeiden University , located in the city of Leiden, is the oldest university in the Netherlands. The university was founded in 1575 by Prince William of Orange, leader of the Dutch Revolt in the Eighty Years' War. The royal Dutch House of Orange-Nassau and Leiden University still have a close...
and established the
hortus academicusThe Hortus botanicus of Leiden is the oldest botanical garden of the Netherlands, and one of the oldest in the world. It is located in the southwestern part of the historical centre of the city, between the Academy building and the Leiden Observatory.-History:...
. There, he planted his collection of tulip bulbs—sent to him from
TurkeyTurkey , known officially as the Republic of Turkey
, is a Eurasian country that stretches across the Anatolian peninsula in Western Asia and Thrace in the Balkan region of southeastern Europe...
by the Emperor's (
Ferdinand I, Holy Roman EmperorFerdinand I was a Central European monarch from the House of Habsburg. He was Holy Roman Emperor from 1558, King of Bohemia and Hungary from 1526. He ruled the Austrian hereditary lands of the Habsburgs most of his public life, at the behest of his elder brother, Charles V, Holy Roman Emperor and...
) ambassador to the Sultan, Ogier de Busbecq—which were able to tolerate the harsher conditions of the
Low CountriesThe Low Countries, the historical region of de Nederlanden, are the countries on low-lying land around the delta of the Rhine, Scheldt, and Meuse rivers...
, and it was shortly thereafter they began to grow in popularity.
The flower rapidly became a coveted luxury item and a
status symbolA status symbol is a perceived visible, external denotation of one's social position and perceived indicator of economic or social status. Many luxury goods are often considered status symbols...
, and a profusion of varieties followed. They were classified in groups; one-coloured tulips of red, yellow, or white were known as
Couleren, but it was the multicoloured
Rosen (red or pink on white background),
Violetten
(purple or lilac on white background), and, to a lesser extent, the
Bizarden (red, brown or purple on yellow background) that were the most popular. These spectacular and highly sought-after tulip bulbs would grow flowers with vivid colors, lines, and flames on the petals, as a result, it is now understood, of being infected with a tulip-specific
virusPlant viruses are viruses affecting plants. Like all other viruses, plant viruses are obligate intracellular parasites that do not have the molecular machinery to replicate without a host. Plant viruses are defined as viruses pathogenic to higher plants...
known as the "
Tulip breaking virusThe Tulip breaking virus, also known as the "Tulip break virus", "Tulip breaking potyvirus", "Lily streak virus", "Tulip mosaic virus", "Lily mottle virus", "Lily mosaic virus", or simply "TBV" is a plant virus that is most famous for its infection of tulips...
", a type of mosaic virus.
Growers named their new varieties with exalted titles. Many early forms were prefixed
Admirael ("admiral"), often combined with the growers' names—
Admirael van der Eijck was perhaps the most highly regarded of about fifty so named.
Generael ("general") was another prefix which found its way into the names of around thirty varieties. Later came varieties with even more superb names, derived from
Alexander the GreatAlexander III of Macedon, popularly known as Alexander the Great , was an Ancient Greek king of Macedon who created one of the largest empires in ancient history...
or
ScipioPublius Cornelius Scipio Africanus also known as Scipio Africanus, Scipio the Elder, and Africanus the Elder was a general in the Second Punic War and statesman of the Roman Republic...
, or even "Admiral of Admirals" and "General of Generals". However, naming could be haphazard and varieties highly variable in quality. Most of these varieties have now died out, though similar "broken" tulips continue in the trade.
Tulips grow from
bulbA bulb is an underground vertical shoot that has modified leaves that are used as food storage organs by a dormant plant....
s, and can be propagated through both seeds and buds. Seeds from a tulip will form a flowering bulb after 7–12 years. When a bulb grows into the flower, the original bulb will disappear, but a clone bulb forms in its place, as do several buds. Properly cultivated, these buds will become bulbs of their own. The mosaic virus spreads only through buds, not seeds, and so cultivating the most appealing varieties takes years. Propagation is greatly slowed down by the virus. Tulips bloom in April and May for only about a week, and the secondary buds appear shortly thereafter. Bulbs can be uprooted and moved about from June to September, and thus actual purchases (in the
spot marketThe spot market or cash market is a commodities or securities market in which goods are sold for cash and delivered immediately. Contracts bought and sold on these markets are immediately effective. Spot markets can operate wherever the infrastructure exists to conduct the transaction...
) occurred during these months.
During the rest of the year, traders signed contracts before a
notaryCivil-law notaries are specialized lawyers acting as public officers with jurisdiction over voluntary, i.e., non-contentious, private law. Unlike notary publics, their common-law counterparts, they are able to provide legal advice and prepare instruments with legal effect...
to purchase tulips at the end of the season (effectively
futures contractFutures contract, in finance, refers to a standardized contract to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price . The contracts are traded on a futures exchange. Futures contracts are not "direct" securities like stocks,...
s). Thus the Dutch, who developed many of the techniques of modern finance, created a market for
durableIn economics, a durable good or a hard good is a good which does not quickly wear out, or more specifically, it yields services or utility over time rather than being completely used up when used once. Most goods are therefore durable goods to a certain degree. These are goods that can last for a...
tulip bulbs. Short selling was banned by an edict of 1610, which was reiterated or strengthened in 1621 and 1630, and again in 1636. Short sellers were not prosecuted under these edicts, but their contracts were deemed unenforceable.
As the flowers grew in popularity, professional growers paid higher and higher prices for bulbs with the virus. By 1634, in part as a result of demand from the French, speculators began to enter the market. In 1636, the Dutch created a type of formal
futures marketA futures exchange or derivatives exchange is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future.-History...
s where contracts to buy bulbs at the end of the season were bought and sold. Traders met in "colleges" at taverns and buyers were required to pay a 2.5% "wine money" fee, up to a maximum of three florins, per trade. Neither party paid an initial
marginIn finance, a margin is collateral that the holder of a position in securities, options, or futures contracts has to deposit to cover the credit risk of his counterparty...
nor a mark-to-market margin, and all contracts were with the individual counterparties rather than with the exchange. No deliveries were ever made to fulfill these contracts because of the market collapse in February 1637. This trade was centered in
Haarlem', in the past usually Harlem in English, is a municipality and a city in the Netherlands. It is also the capital of the province of North Holland, the northern half of Holland, which at one time was the most powerful of the seven provinces of the Dutch Republic.Haarlem had a total population 148...
during the height of a
bubonic plaguePlague is a deadly infectious disease caused by the enterobacteria Yersinia pestis . Plague is a zoonotic, primarily carried by rodents and spread to humans via fleas. Plague is notorious throughout history, due to the unrivaled scale of death and devastation it brought...
epidemic, which may have contributed to a culture of fatalistic risk taking.
The contract price of rare bulbs continued to rise throughout 1636. That November, the contract price of common bulbs without the valuable mosaic virus also began to rise in value. The Dutch derogatorily described tulip contract trading as
windhandel (literally "wind trade"), because no bulbs were actually changing hands. However in February 1637, tulip bulb contract prices collapsed abruptly and the trade of tulips ground to a halt.
Available price data
The lack of consistently recorded price data from the 1630s makes the extent of the tulip mania difficult to estimate. The bulk of available data comes from anti-speculative pamphlets by "Gaergoedt and Warmondt" (GW) written just after the bubble. Economist Peter Garber collected data on the sales of 161 bulbs of 39 varieties between 1633 and 1637, with 53 being recorded by GW. Ninety-eight sales were recorded for the last date of the bubble, February 5, 1637, at wildly varying prices. The sales were made using several market mechanisms: futures trading at the colleges, spot sales by growers, notarized futures sales by growers, and estate sales. "To a great extent, the available price data are a blend of apples and oranges," according to Garber.
Mackay's Madness of Crowds
| Goods allegedly exchanged for a single bulb of the Viceroy |
| Two lasts of wheat |
448ƒ |
| Four lasts of rye |
558ƒ |
| Four fat oxen |
480ƒ |
| Eight fat swine |
240ƒ |
| Twelve fat sheep |
120ƒ |
| Two hogsheads of wine |
70ƒ |
| Four tuns of beer |
32ƒ |
| Two tons of butter |
192ƒ |
| 1,000 lb. of cheese |
120ƒ |
| A complete bed |
100ƒ |
| A suit of clothes |
80ƒ |
| A silver drinking cup |
60ƒ |
| Total |
2500ƒ |
The modern discussion of tulip mania began with the book
Extraordinary Popular Delusions and the Madness of CrowdsExtraordinary Popular Delusions and the Madness of Crowds is a popular history of popular folly by Charles Mackay, first published in 1841. The book chronicles its targets in three parts: "National Delusions", "Peculiar Follies", and "Philosophical Delusions".The subjects of Mackay's debunking...
, published in 1841 by the Scottish journalist
Charles MackayCharles Mackay was a Scottish poet, journalist, and song writer.He was born in Perth, Scotland. His mother died shortly after his birth and his father was by turns a naval officer and a foot soldier. He was educated at the Caledonian Asylum, London, and at Brussels, but spent much of his early...
; he proposed that crowds of people often behave irrationally, and tulip mania was, along with the South Sea Bubble and the
Mississippi CompanyThe Mississippi Company became the Company of the West and expanded as the Company of the Indies .The French names for the company were: in 1684, Compagnie du Mississippi; in 1717 Compagnie d'Occident; and in 1719, Compagnie des Indes .-History:A factor in the history of French trade, the...
scheme, one of his primary examples. His account was largely sourced to a 1797 work by
Johann BeckmannJohann Beckmann was a German scientific author and coiner of the word technology, to mean the science of trades. He was the first man to teach technology and write about it as an academic subject....
titled
A History of Inventions, Discoveries, and Origins. In fact, Beckmann's account, and thus Mackay's by association, was primarily sourced to three anonymous pamphlets published in 1637 with an anti-speculative agenda. Mackay's vivid book was popular among generations of economists and stock-market participants. His popular but flawed description of tulip mania as a speculative bubble remains prominent, even though since the 1980s economists have debunked many aspects of his account.
According to Mackay, the growing popularity of tulips in the early 1600s caught the attention of the entire nation; "the population, even to its lowest dregs, embarked in the tulip trade". By 1635, a sale of 40 bulbs for 100,000 florins (also known as Dutch guilders) was recorded. By way of comparison, a ton of butter cost around 100 florins, a skilled laborer might earn 150 florins a year, and "eight fat swine" cost 240 florins. (According to the
International Institute of Social HistoryThe International Institute of Social History is a historical research institute in Amsterdam. It was founded in 1935 by Nicolaas Posthumus...
, one florin had the
purchasing powerPurchasing power is the number of goods/services that can be purchased with a unit of currency. For example, if you had taken one dollar to a store in the 1950s, you would have been able to buy a greater number of items than you would today, indicating that you would have had a greater purchasing...
of
€The euro is the official currency of 16 of the 27 Member States of the European Union . The states, known collectively as the Eurozone, are Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain...
10.28 in 2002.)
By 1636, tulips were traded on the
exchangeA stock exchange is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital...
s of numerous Dutch towns and cities. This encouraged trading in tulips by all members of society; Mackay recounted people selling or trading their other possessions in order to speculate in the tulip market, such as an offer of of land for one of two existing
Semper Augustus bulbs, or a single bulb of the
Viceroy which was purchased for a basket of goods (shown at right) worth 2,500 florins.
The increasing mania contributed several amusing, but unlikely, anecdotes that Mackay recounted, such as a sailor who mistook the valuable tulip bulb of a merchant for an onion and grabbed it to eat. The merchant and his family chased the sailor to find him "eating a breakfast whose cost might have regaled a whole ship's crew for a twelvemonth". The sailor was jailed for eating the bulb.
People were purchasing bulbs at higher and higher prices, intending to re-sell them for a profit. However, such a scheme could not last unless someone was ultimately willing to pay such high prices and take possession of the bulbs. In February 1637, tulip traders could no longer find new buyers willing to pay increasingly inflated prices for their bulbs. As this realization set in, the demand for tulips collapsed, and prices plummeted—the
speculative bubbleA stock market bubble is a type of economic bubble taking place in stock markets when market participants drive stock prices above their value in relation to some system of stock valuation....
burst. Some were left holding contracts to purchase tulips at prices now ten times greater than those on the open market, while others found themselves in possession of bulbs now worth a fraction of the price they had paid. Mackay claims the Dutch devolved into distressed accusations and recriminations against others in the trade.
In Mackay's account, the panicked tulip speculators sought help from the government of the Netherlands, which responded by declaring that anyone who had bought contracts to purchase bulbs in the future could void their contract by payment of a 10-percent fee. Attempts were made to resolve the situation to the satisfaction of all parties, but these were unsuccessful. The mania finally ended, Mackay says, with individuals stuck with the bulbs they held at the end of the crash—no court would enforce payment of a contract, since judges regarded the debts as contracted through gambling, and thus not enforceable by law.
According to Mackay, lesser tulip manias also occurred in other parts of Europe, although matters never reached the state they had in the Netherlands. He also claimed that the aftermath of the tulip price deflation led to a widespread economic chill throughout the Netherlands for many years afterwards.
Modern views
Mackay's account of inexplicable mania was unchallenged, and mostly unexamined, until the 1980s. However, research into tulip mania since then, especially by proponents of the
efficient market hypothesisIn finance, the efficient-market hypothesis asserts that financial markets are "informationally efficient", or that prices on traded assets already reflect all known information, and instantly change to reflect new information...
, who are more skeptical of speculative bubbles in general, suggests that his story was incomplete and inaccurate. In her 2007 scholarly analysis
Tulipmania, Anne Goldgar states that the phenomenon was limited to "a fairly small group", and that most accounts from the period "are based on one or two contemporary pieces of
propagandaPropaganda is communication aimed at influencing the attitude of a community toward some cause or position. As opposed to impartially providing information, propaganda in its most basic sense, presents information primarily to influence an audience...
and a prodigious amount of
plagiarismPlagiarism, as defined in the 1995 Random House Compact Unabridged Dictionary, is the "use or close imitation of the language and thoughts of another author and the representation of them as one's own original work." Within academia, plagiarism by students, professors, or researchers is considered...
". Peter Garber argues that the bubble "was no more than a meaningless winter drinking game, played by a plague-ridden population that made use of the vibrant tulip market."
While Mackay's account held that a wide array of society was involved in the tulip trade, Goldgar's study of archived contracts found that even at its peak the trade in tulips was conducted almost exclusively by merchants and skilled craftsmen who were wealthy, but not members of the nobility. Any economic fallout from the bubble was very limited. Goldgar, who identified many prominent buyers and sellers in the market, found fewer than half a dozen who experienced financial troubles in the time period, and even of these cases it is not clear that tulips were to blame. This is not altogether surprising. Although prices had risen, money had not exchanged hands between buyers and sellers. Thus profits were never realized for sellers; unless sellers had made other purchases on credit in expectation of the profits, the collapse in prices did not cause anyone to lose money.
Rational explanations
There is no dispute that prices for tulip bulb contracts rose and then fell in 1636–37, but even a dramatic rise and fall in prices does not necessarily mean that an
economicAn economic bubble is “trade in high volumes at prices that are considerably at variance with intrinsic values”...
or speculative bubble developed and then burst. For tulip mania to have qualified as an economic bubble, the price of tulip bulbs would need to have become unhinged from the
intrinsic valueIn finance, intrinsic value refers to the value of a security which is intrinsic to or contained in the security itself. It is also frequently called fundamental value. It is ordinarily calculated by summing the future income generated by the asset, and discounting it to the present...
of the bulbs. Modern economists have advanced several possible reasons for why the rise and fall in prices may not have constituted a bubble.
The increases of the 1630s corresponded with a lull in the
Thirty Years' WarThe Thirty Years' War was one of the most destructive conflicts in European history. The war was fought primarily in Germany and at various points involved most of the countries of Europe...
. Hence market prices (at least initially) were responding rationally to a rise in demand. However, the fall in prices was faster and more dramatic than the rise. Data on sales largely disappeared after the February 1637 collapse in prices, but a few other data points on bulb prices after tulip mania show that bulbs continued to lose value for decades thereafter.
Volatility in flower prices
Garber compared the available price data on tulips to hyacinth prices at the beginning of the 19th century—when the hyacinth replaced the tulip as the fashionable flower—and found a similar pattern. When hyacinths were introduced florists strove with one another to grow beautiful hyacinth flowers, as demand was strong. However, as people became more accustomed to hyacinths the prices began to fall. The most expensive bulbs fell to 1–2 percent of their peak value within 30 years. Garber also notes that, "a small quantity of prototype lily bulbs recently was sold for 1 million guilders ($480,000 at 1987 exchange rates)", demonstrating that even today flowers can command extremely high prices. Additionally, because the rise in prices occurred after bulbs were planted for the year, growers would not have had an opportunity to increase production in response to price.
Legal changes
UCLA economics professor Earl A. Thompson argues in a 2007 paper that Garber's explanation cannot account for the extremely swift drop in tulip bulb contract prices. The annualized rate of price decline was 99.999%, instead of the average 40% for other flowers. He provides another explanation for Dutch tulip mania. The Dutch parliament was considering a decree (originally sponsored by Dutch tulip investors who had lost money because of a German setback in the Thirty Years' War) that changed the way tulip contracts functioned:
Before this parliamentary decree, the purchaser of a tulip contract—known in modern finance as a
futures contractFutures contract, in finance, refers to a standardized contract to buy or sell a specified commodity of standardized quality at a certain date in the future, at a market determined price . The contracts are traded on a futures exchange. Futures contracts are not "direct" securities like stocks,...
—was legally
obliged to buy the bulbs. The decree changed the nature of these contracts, so that if the
current market priceThe spot price or spot rate of a commodity, a security or a currency is the price that is quoted for immediate settlement . Spot settlement is normally one or two business days from trade date...
fell, the purchaser could opt to pay a penalty and forgo receipt of the bulb, rather than pay the full contracted price. This change in law meant that, in modern terminology, the futures contracts had been transformed into
options contractIn finance, an option is a contract between a buyer and a seller that gives the buyer the right, but not the obligation, to buy or to sell a particular asset on or before the option's expiration time, at an agreed price, the strike price. In return for granting the option, the seller collects a...
s. This proposal began to be debated in the fall of 1636, and if it became clear to investors that the decree was likely to be enacted, prices probably would have risen.
This decree allowed someone who purchased a contract to void the contract with a payment of only 3 1/2 percent of the contract price (or about 1/30th the contract). Thus, investors bought increasingly expensive contracts. A speculator could sign a contract to purchase a tulip for 100 guilders. If the price rose above 100 guilders, the speculator would pocket the difference as profit. If the price remained low, the speculator could void the contract for only 3 1/2 guilders. Thus, a contract nominally for 100 guilders, would actually cost an investor no more than 3 1/2 guilders. In early February, as contract prices reached a peak, Dutch authorities stepped in and halted the trading of these contracts.
Thompson states that actual sales of tulip bulbs remained at ordinary levels throughout the period. Thus, Thompson concludes that the "mania" was a rational response to changes in contractual obligations. Using data about the specific payoffs present in the futures and option contracts, Thompson argues that tulip bulb contract prices hewed closely to what a rational economic model would dictate, "Tulip contract prices before, during, and after the 'tulipmania' appear to provide a remarkable illustration of 'market efficiency'."
Critiques
Other economists believe that these elements cannot completely explain the dramatic rise and fall in tulip prices. Garber's theory has also been challenged for failing to explain a similar dramatic rise and fall in prices for regular tulip bulb contracts. Some economists also point to other factors associated with speculative bubbles, such as a
growth in the supply of moneyExpansionary monetary policy is monetary policy that seeks to increase the size of the money supply. In most nations, monetary policy is controlled by either a central bank or a finance ministry...
, demonstrated by an increase in deposits at the Bank of Amsterdam during that period.
Social mania and legacy
The popularity of Mackay's tale has continued to this day, with new editions of
Extraordinary Popular Delusions appearing regularly, with introductions by writers such as financier
Bernard BaruchBernard Mannes Baruch was an American financier, stock-market speculator, statesman, and political consultant. After his success in business, he devoted his time toward advising Democratic U.S. Presidents Woodrow Wilson and Franklin D...
(1932), financial writers
Andrew TobiasAndrew Tobias is an American journalist, author, and columnist. His main body of work is on investment, but he has also written on politics, insurance, and other topics. Since 1999, he has been the treasurer of the Democratic National Committee.-Biography:Tobias graduated from Harvard University...
(1980), and
Michael LewisMichael Lewis is an American contemporary non-fiction author and financial journalist. His bestselling books include Liar's Poker, The New New Thing, Moneyball: The Art of Winning an Unfair Game, The Blind Side: Evolution of a Game, and Home Game: An Accidental Guide to Fatherhood...
(2008), and psychologist
David J. SchneiderDavid J. Schneider is an American psychologist. He is a professor of psychology and the director of the cognitive sciences program at Rice University.-Career and work:...
(1993). At least six editions are currently in print.
Goldgar argues that although tulip mania may not have constituted an economic or speculative bubble, it was nonetheless traumatic to the Dutch for other reasons. "Even though the financial crisis affected very few, the shock of tulipmania was considerable. A whole network of values was thrown into doubt." In the 17th century, it was unimaginable to most people that something as common as a flower could be worth so much more money than most people earned in a year. The idea that the prices of flowers that grow only in the summer could fluctuate so wildly in the winter, threw into chaos the very understanding of "value".
Many of the sources telling of the woes of tulip mania, such as the anti-speculative pamphlets which were later reported by Beckmann and Mackay, have been cited as evidence of the extent of the economic damage. These pamphlets, however, were not written by victims of a bubble, but were primarily religiously motivated. The upheaval was viewed as a perversion of the moral order—proof that "concentration on the earthly, rather than the heavenly flower could have dire consequences". Thus, it is possible that a relatively minor economic event took on a life of its own as a morality tale.
Nearly a century later, during the crash of the
Mississippi CompanyThe Mississippi Company became the Company of the West and expanded as the Company of the Indies .The French names for the company were: in 1684, Compagnie du Mississippi; in 1717 Compagnie d'Occident; and in 1719, Compagnie des Indes .-History:A factor in the history of French trade, the...
and the South Sea Company in about 1720, tulip mania appeared in satires of these manias. When
Johann BeckmannJohann Beckmann was a German scientific author and coiner of the word technology, to mean the science of trades. He was the first man to teach technology and write about it as an academic subject....
first described tulip mania in the 1780s, he compared it to the failing lotteries of the time. In Goldgar's view, even many modern popular works about financial markets, such as
Burton MalkielBurton Gordon Malkiel is an American economist and writer, most famous for his classic finance book A Random Walk Down Wall Street...
's
A Random Walk Down Wall StreetA Random Walk Down Wall Street, written by Burton Malkiel, a Princeton economist, is an influential book on the subject of stock markets. Malkiel argues that asset prices typically exhibit signs of random walk and that one can not consistently outperform market averages. The book is frequently...
(1973) and
John Kenneth GalbraithJohn Kenneth "Ken" Galbraith, OC was a Canadian-American economist. He was a Keynesian and an institutionalist, a leading proponent of 20th-century American liberalism and progressivism...
's
A Short History of Financial Euphoria (1990; written soon after the stock market crash of 1987), used the tulip mania as a lesson in morality. The volatility of the tulip market is also a major plot element in
Gregory MaguireGregory Maguire is an American author. He is the author of the novels Wicked: The Life and Times of the Wicked Witch of the West, Confessions of an Ugly Stepsister, and many other novels for adults and children...
's novel,
Confessions of an Ugly StepsisterConfessions of an Ugly Stepsister is a novel by Gregory Maguire, retelling the tale of Cinderella through the eyes of one of her "ugly stepsisters." In 2002, the book was adapted into a TV movie of the same name, directed by Gavin Millar.-Plot:...
(1999).
Tulip mania again became a popular reference during the
dot-com bubbleThe "dot-com bubble" was a speculative bubble covering roughly 1998–2001 during which stock markets in Western nations saw their equity value rise rapidly from growth in the more recent Internet sector and related fields...
of 1995–2001. Most recently, journalists have compared it to the
subprime mortgage crisisThe subprime mortgage crisis is an ongoing real estate and financial crisis triggered by a dramatic rise in mortgage delinquencies and foreclosures in the United States, with major adverse consequences for banks and financial markets around the globe...
. Despite the mania's enduring popularity,
Daniel GrossDaniel Gross is an American journalist, and writes for Slates "Moneybox" column and for the New York Timess "Economic View" column.-Career:...
of
SlateSlate is an English-language online current affairs and culture magazine created in 1996 by former New Republic editor Michael Kinsley, initially under the ownership of Microsoft, as part of MSN. On December 21, 2004, it was purchased by the Washington Post Company...
has said of economists offering
efficient marketIn finance, the efficient-market hypothesis asserts that financial markets are "informationally efficient", or that prices on traded assets already reflect all known information, and instantly change to reflect new information...
explanations for the mania, that "If they're correct ... then business writers will have to delete Tulipmania from their handy-pack of bubble analogies."
See also
- Tulip period of the Ottoman Empire
The Ottoman Empire or Ottoman State , also known by its contemporaries as the Turkish Empire or Turkey , was an empire that lasted from 1299 to November 1, 1922 The Ottoman Empire or Ottoman State (Ottoman Turkish: دَوْلَتِ عَلِیَّهِ عُثْمَانِیَّه Dawlet-il ʿAliyyat-il ʿOs̠māniyye, Modern Turkish:...
.
- Orchidelirium
Orchidelirium is the name given to the Victorian era of flower madness when collecting and discovering Orchids reached extraordinarily high levels. Wealthy orchid fanatics of the 19th century sent explorers and collectors to almost every part of the world in search of new varieties of orchids....
the Victorian eraThe Victorian era of the United Kingdom was the period of Queen Victoria's reign from June 1837 until her death on the 22nd of January 1901. The reign was a long period of prosperity for the British people, as profits gained from the overseas British Empire, as well as from industrial improvements...
of flower madness in which the collecting of orchids reached extraordinary levels.
- South Sea Bubble - Another huge speculative bubble.
External links