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attention of the entire nation the population even to its lowest dregs embarked in the tulip trade 14 by 1635 a sale of 40 bulbs for ƒ100 000 was recorded by way of comparison a tun 930 kg or 2 050 lb of butter cost around ƒ100 a skilled labourer might earn ƒ150 350 a year and eight fat swine cost ƒ240 14 by 1636 tulips were traded on the exchanges of numerous dutch towns and cities this encouraged trade by all members of society mackay recounted people selling possessions in order to speculate on the tulip market such as an offer of 5 ha 12 acres of land for one of two existing semper augustus bulbs or a single bulb of the viceroy that he said was purchased in exchange for a basket of goods shown in table worth ƒ2 500 57 many individuals suddenly became rich a golden bait hung temptingly out before the people and one after the other they rushed to the tulip marts like flies around a honey pot every one imagined that the passion for tulips would last for ever and that the wealthy from every part of the world would send to the dutch republic and pay whatever prices were asked for them the riches of europe would be concentrated on the shores of the zuyder zee zuiderzee and poverty banished from the favoured clime of the dutch republic nobles citizens farmers mechanics seamen footmen maidservants even chimney sweeps and old clotheswomen dabbled in tulips 14 pamphlet of a theatre play on the tulipomania amsterdam 1637 the increasing mania generated several amusing if 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 according to mackay the merchant and his family hunted down the sailor to find him eating a breakfast whose cost might have regaled a whole ship s crew for a twelvemonth the sailor was supposedly jailed for eating the bulb 14 however tulips are poisonous if prepared incorrectly taste bad and are considered to be only marginally edible even during famines 60 this directly contradicts mackay s claim that the tulip bulb had been quite delicious 14 people were purchasing bulbs at higher and higher prices intending to re sell them for a profit 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 realisation set in the demand for tulips collapsed and prices plummeted the speculative bubble 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 says the dutch devolved into distressed accusations and recriminations against others in the trade 14 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 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 14 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 thought that the aftermath of the tulip price deflation led to a widespread economic chill throughout the netherlands for many years afterwards 14 modern views edit mackay s account of inexplicable mania was unchallenged and mostly unexamined until the 1980s 61 research into tulip mania since then especially by proponents of the efficient market hypothesis 18 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 propaganda and a prodigious amount of plagiarism 12 peter garber argues that the trade in common bulbs was no more than a meaningless winter drinking game played by a plague ridden population that made use of the vibrant tulip market 62 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 63 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 64 this is not altogether surprising although prices had risen money had not changed hands between buyers and sellers thus profits were never realised 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 65 still life with flowers 1639 by hans bollongier 1623 1672 showcases the prized semper augustus tulip rational explanations edit it is well established that prices for tulip bulb contracts rose and then fell between 1636 and 1637 however such dramatic curves do not necessarily imply that an economic or speculative bubble developed and then burst for the then tulip market to qualify as an economic bubble the price of bulbs would need to have been mutually agreed and surpassed the intrinsic value of the bulbs modern economists have advanced several possible reasons for why the rise and fall in prices may not have constituted a bubble even though a viceroy tulip was worth upwards of five times the cost of an average house at the time 66 the increases of the 1630s corresponded with a lull in the thirty years war 67 in 1634 1635 the german and swedish armies lost ground in the south of germany then cardinal infante ferdinand of austria moved north after the peace of prague the french and the dutch decided to support the swedish and german protestants with money and arms against the habsburg empire and to occupy the spanish netherlands in 1636 hence market prices at least initially were responding rationally to a rise in demand 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 citation needed natural volatility in flower prices edit 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 as people became more accustomed to hyacinths the prices began to fall the most expensive bulbs fell to 1 2 of their peak value within 30 years 68 garber notes in 1989 that a small quantity of prototype lily bulbs recently was sold for ƒ1 million demonstrating that even in the modern world flowers can command extremely high prices 69 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 70 critiques edit other economists believe that these elements cannot completely explain the dramatic rise and fall in tulip prices 71 garber s theory has also been challenged for failing to explain a similar dramatic rise and fall in prices for regular tulip bulb contracts 7 some economists also point to other factors associated with speculative bubbles such as a growth in the supply of money demonstrated by an increase in deposits at the bank of amsterdam during that period 72 legal changes edit earl thompson argued in a 2007 paper that garber s explanation cannot account for the extremely swift drop in tulip bulb contract prices the annualised rate of price decline was 99 999 instead of the average 40 for other flowers 66 he provided another explanation for dutch tulip mania since late 1636 the dutch parliament had been considering a decree originally sponsored by dutch tulip investors who had lost money because of a german setback in the thirty years war 73 that changed the way tulip contracts functioned on 24 february 1637 the self regulating guild of dutch florists in a decision that was later ratified by the dutch parliament announced that all futures contracts written after 30 november 1636 and before the re opening of the cash market in the early spring were to be interpreted as option contracts they did this by simply relieving the futures buyers of the obligation to buy the future tulips forcing them merely to compensate the sellers with a small fixed percentage of the contract price 74 before this parliamentary decree the purchaser of a tulip contract known in modern finance as a forward contract was legally obliged to buy the bulbs the decree changed the nature of these contracts so that if the current market price 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 forward contracts had been transformed into options contracts contracts which were extremely favourable to the buyers citation needed thompson argues that the bubble in the price of tulip bulb forward prior to the february 1637 decree was due primarily to buyers awareness of what was coming although the final 3 5 premium was not actually settled until february 24 thompson writes as information entered the market in late november contract prices soared to reflect the expectation that the contract price was now a call option exercise or strike price rather than a price committed to be paid 74 thompson concludes that the real victims of the contractual conversion were the investors who had bought forward contracts prior to november 30 1636 on the incorrect assumption that their contracts would benefit from the february 1637 decree 74 in other words many investors were making an additional gamble with respect to the prices the buyers would eventually have to pay for their options 75 a factor unrelated to the intrinsic value of the tulip bulbs themselves using data about the specific payoffs present in the forward and options contracts thompson argued 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 efficient market prices 75 social mania and legacy edit a modern day field of tulips in the netherlands the flower remains a popular symbol of the netherlands 19th century painting depicting tulip mania by johannes hinderikus egenberger 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 baruch 1932 financial writer andrew tobias 1980 76 psychologist david j schneider 1993 and journalist michael lewis 2008 citation needed 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 tulip mania was considerable a whole network of values was thrown into doubt 77 the bubble in 1634 shows how people can get caught up in a financial craze even when something doesn t have real value this is an example of the phenomenon called collective illusions here the dutch elite thought that having their own special tulip bulbs was a must and this made the prices go up even though tulips themselves weren t worth much 78 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 79 many of the sources telling of the woes of tulip mania such as the anti speculative pamphlets that were later reported by beckmann and mackay have been cited as evidence of the extent of the economic damage these pamphlets 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 80 nearly a century later during the crash of the mississippi company and the south sea company in about 1720 tulip mania appeared in satires of these manias 81 when beckmann first described tulip mania in the 1780s he compared it to the failing lotteries of the time 82 in goldgar s view even many modern popular works about financial markets such as burton malkiel s a random walk down wall street 1973 and john kenneth galbraith s a short history of financial euphoria 1990 written soon after the crash of 1987 used the tulip mania as a lesson in morality 83 84 85 tulip mania became a popular reference during the dot com bubble of 1995 2001 83 86 and the subprime mortgage crisis of 2007 2010 87 88 in 2013 nout wellink former president of the de nederlandsche bank dutch central bank described bitcoin as worse than the tulip mania adding at least then you got a tulip now you get nothing 89 despite the mania s enduring popularity daniel gross has said of economists offering efficient market explanations for the mania if they re correct then business writers will have to delete tulipmania from their handy pack of bubble analogies 90 references edit 1 2 cos pieter 1637 auction catalogue verzameling van een meenigte tulipaanen naar het leven geteekend met hunne naamen en swaarte der bollen zoo als die publicq verkogt zijn library wur nl haarlem archived from the original on april 4 2005 retrieved may 18 2026 1 2 nusteling 1985 pp 114 252 254 258 shiller 2005 p 85 more extensive discussion of status as the earliest bubble on pp 247 48 1 2 3 4 tulpenboek uit collectie six rijksmuseum nl rijksmuseum retrieved may 18 2026 kaletsky anatole capitalism 4 0 the birth of a new economy in the aftermath of crisis publicaffairs 2010 pp 109 10 anatole kaletsky the bursting of the tulip bubble in 1637 did not end dutch economic hegemony far from it tulipmania was followed by a century of dutch leadership in almost every branch of global commerce finance and manufacturin...
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