Tulpenmanie

Over the history of the world, there have been many forms of “currency” or at least what was used for currency. In the Old West, doctors often took chickens or eggs for their medical services. During the gold rush, those who found gold dust knew that they could also spend the gold dust. Many other forms of currency have been used, but possibly one of the strangest was tulip bulbs. Nevertheless, it was a real thing for a short time. Tulpenmanie, tulip mania in English, was a period during the Dutch Golden Age. During that time, the prices for certain bulbs of the newly introduced and fashionable tulip soared to astonishing heights.

It’s strange to think of a flower bulb being so expensive that it could be used a currency, but the rapid rise began in 1634, only to collapse dramatically in February 1637. I guess they finally realized how strange it was. Tulpenmanie was seen as the first recorded speculative or asset bubble, it was more of an unfamiliar socio-economic curiosity than a major economic crisis. It had little impact on the prosperity of the Dutch Republic, which remained one of the world’s leading economic powers in the 17th century, boasting the highest per capita income from around 1600 to 1720. Today, the term “Tulip Mania” is often used to describe any large economic bubble where asset prices stray far from their intrinsic values.

Forward markets emerged in the Dutch Republic in the 17th century, with one of the most famous revolving around the tulip trade. A forward market is “an over-the-counter marketplace that sets the price of a financial instrument or asset for future delivery.” At the height of tulip mania in February 1637, some bulbs sold for over ten times the annual income of a skilled artisan. It was crazy!! Studying this period is tricky due to scarce and often biased economic records from the 1630s. Some modern economists suggest that price swings may have had logical causes rather than being pure speculation. For instance, other flowers like hyacinths also started with high prices that dropped as they became easier to grow. Prices may have been further boosted by expectations of a law allowing contracts to be canceled cheaply, reducing risks for buyers.

The 1637 event drew renewed attention in 1841 with the release of the book Extraordinary Popular Delusions and the Madness of Crowds by Scottish journalist Charles Mackay, who claimed that at one point, “5 hectares (12 acres) of land were offered for a single Semper Augustus bulb.” He wrote that many investors were ruined when prices collapsed, dealing a severe blow to Dutch commerce. While Mackay’s work is often cited, his version of events is debated, and many modern scholars think the mania wasn’t as devastating as he portrayed. We will likely never know, but rather there will always be merely speculation, mostly due to the era in which the mania occurred.