On Holland’s legendary tulip bubble, which burst today in 1637.
When economists need to summon an age of unchecked speculation and financial fecklessness—usually as an analog to our own—the Dutch tulip mania is at the top of the list. If you’re not familiar with the story, it’s an early and especially hysterical example of the vagaries of the stock market: In the mid-1630s, the Dutch fell rapturously in love with tulips, whose vivid petals made them the envy of every Hendrik and Veerle in the neighborhood. The flower became a status symbol, and the Dutch were all but tripping over one another’s clogs in a race to conspicuously consume. To satisfy burgeoning demand, speculators began to trade in what were essentially tulip futures; these grew outlandishly complicated and expensive, and on the third of February, 1637, the tulip market collapsed.
The Scottish journalist Charles Mackay gave currency to the incident. He offers a trenchant, if dubious, account of the whole debacle in his 1841 book, Extraordinary Popular Delusions and the Madness of Crowds, which takes, as its title suggests, a pretty dim view of group dynamics. In his chapter on “the tulipomania,” Mackay presents a cautionary tale rife with tulip jobbers, tulip marts, tulip notaries, and tulip parties:
The demand for tulips of a rare species increased so much in the year 1636, that regular marts for their sale were established on the Stock Exchange of Amsterdam, in Rotterdam, Harlaem, Leyden, Alkmar, Hoorn, and other towns … The tulip-jobbers speculated in the rise and fall of the tulip stocks, and made large profits by buying when prices fell, and selling out when they rose. Many individuals grew suddenly 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 … Nobles, citizens, farmers, mechanics, sea-men, footmen, maid-servants, even chimney-sweeps and old clothes-women, dabbled in tulips. People of all grades converted their property into cash, and invested it in flowers. Houses and lands were offered for sale at ruinously low prices, or assigned in payment of bargains made at the tulip-mart … In the smaller towns, where there was no exchange, the principal tavern was usually selected as the “show-place,” where high and low traded in tulips, and confirmed their bargains over sumptuous entertainments. These dinners were sometimes attended by two or three hundred persons, and large vases of tulips, in full bloom, were placed at regular intervals upon the tables and sideboards for their gratification during the repast.
Mackay also recounts the story of a sailor who ate a merchant’s tulip bulb, thinking it was an onion. He rotted in jail.
Most edifying of all, though, is a list of various articles that “were delivered for one single root of the rare species called the Viceroy,” which gives an astonishing sense of just how inflated the flowers’ value was:
- Two lasts of wheat
- Four lasts of rye
- Four fat oxen
- Eight fat swine
- Twelve fat sheep
- Two hogsheads of wine
- Four tuns of beer
- Two tuns of butter
- One thousand lbs. of cheese
- A complete bed
- A suit of clothes
- A silver drinking-cup
In defense of the Dutch, though, the Viceroy is, or was, one hell of a fetching flower:
Today, economic historians are inclined to believe that Mackay’s report is something of an embroidery; given the constraints of seventeenth-century record keeping, one suspects he wasn’t exactly poring over the data and crunching numbers. But I, for one, choose to regard Popular Delusions as gospel truth, if only because the image of a thousand pounds of cheese being relinquished for a single bulb is too fantastic to be fiction.