The myth of Tulipmania

by Chris Bertram on May 12, 2007

Simon Kuper, in today’s FT, “reviews Anne Goldgar’s _Tulipmania_, “: a new study of the 17th century boom and bust in the Dutch tulip market. Disappointingly, it turns out that most of the stories are false. There was a boom, but it was a fairly marginal phenomenon in the Dutch economy, and people weren’t ruined: the deals were done when the plants were in the ground, but payment was due only when the bulbs were dug up. Most people simply refused to pay, or paid only a small fraction of what they owed.



derek 05.12.07 at 9:41 am

Well that’s no fun.


John Rynne 05.12.07 at 10:50 am

Phony tulipmania has bitten the dust. (Sorry, couldn’t resist).


Jacob Christensen 05.12.07 at 11:04 am

Academically, it’s another case of “why you should always go back to the original sources and not depend on second-hand narratives”.

Goldgar could be an instant classic in methods courses.


William Burns 05.12.07 at 12:52 pm

Some of this, judging by the review, seems like banging at an open door–I’ve never heard anyone claim that tulipmania destroyed the Dutch economy, still less that it put the Dutch off tulips.


dsquared 05.12.07 at 1:12 pm

This is the Peter Garber revisionist version of Tulipmania. There are a lot of other historians who don’t believe it was a myth.


dsquared 05.12.07 at 1:15 pm

(specifically, Edward Chancellor had a lot of things to say about this version of history, though most of them behind JSTOR paywalls these days. I’d note that if people “just” failed to honour their debts, that’s actually quite serious.


John Emerson 05.12.07 at 2:18 pm

This book should never have been published. While I believe in free speech, the destruction of fun anecdotes is a detestable abomination and against nature. When I am Hitler, urban legends will have the status the Catholic creed had in the Middle Ages.

Another guy who’s going down is the Language Log guy who debunked the Eskimos words for snow. Some people should be very afraid.


Richard 05.12.07 at 2:28 pm

There’s not much sign of a dent in the VOC economy in 1637, though (the other great bubble market, based mostly on spices). I would expect some overlap in the people who speculated in tulips and those in the Indies fine spices and dye-woods markets. These same people might also have had their sense of commercial honour eroded by being ripped off by the VOC more or less continuously since 1604 (the honourable company was routinely paying dividends not in cash as promised but in pepper, which it quoted at fictitious prices against a market it had already glutted).


Ben Alpers 05.12.07 at 3:55 pm

Phony tulipmania has bitten the dust. (Sorry, couldn’t resist).

I assume someone else is already working on the complete lyrics to “Leiden Calling,” so I won’t bother doing it myself.


accordingly 05.12.07 at 6:42 pm

Well according to a Yale study conducted in the late 50s, tulipmania was very much a reality of the Dutch economy in the 17th century.


grackel 05.12.07 at 7:54 pm

I suppose next you’ll be saying the Dutch don’t wear wooden shoes. Myself, I’m waiting for Dsquared’s essay with endnotes about how American chocolate is traditional, natural and pretty damn near as good as any Dutch, Belgian or Swiss chocolate, because chocolate is, you know, an industrial product.


Bob B 05.12.07 at 8:58 pm

As Disraeli wrote (I believe): Read no history, nothing but biography for that is life without theory.

Tulip mania is only one among several stockmarket bubbles related in CP KIndleberger’s well-known and engaging book: Manias, Panics and Crashes (1978), a much cited text on financial debacles, as in, for instance:

What of other stockmarket debacles, such as the South Sea Bubble? Is that also mythological? On the biography angle, by reports Sir Isaac Newton bought South Sea Company stock:

From Burton Malkiel: A Random Walk Down Wall Street, on the South Sea Bubble of 1720:

“The prize must surely go to the unknown soul who started ‘A Company for carrying on undertaking of great advantage, but nobody knows what it is.’ The prospectus promised unheard of rewards. At nine o’clock in the morning, when the subscription books opened, crowds of people from all walks of life practically beat down the door in an effort to subscribe. Within five hours a thousand investors handed over their money for shares in the company. Not being greedy himself, the promoter promptly closed up shop and set off for the Continent. He was never heard of again.”

The author’s message: “When Dr. Burton Malkiel wrote A Random Walk Down Wall Street in 1973, now in its eighth edition, he offered up the premise that a blindfolded chimpanzee throwing darts at the Wall Street Journal could select a portfolio that performs as well as those managed by the experts.”

Whisper it not: Warren Buffett.


string 05.12.07 at 9:11 pm

@dsquared: Although reneging on debts is indeed serious, the argument that I heard a few years ago is that the very reason that the prices got so out of hand is because people knew that the contracts were not legally enforceable, and were only ever worth about 10% of the face value.


Bob B 05.12.07 at 10:52 pm

A 19th century source on the Dutch Tulip mania in the 17th century, much quoted in later writings about stockmarket bubbles, is accessible on the web. See Charles Mackay: Memoirs of Extraordinary Popular Delusions and the Madness of Crowds (1841):

Try Chapter 2 on the South Sea Bubble for an acccount of “A Company for carrying on undertaking of great advantage, but nobody knows what it is.”

We also have this illuminating insight about rational motivation in the FOREX market:

“Nobel laureate James Tobin reports that one of his Yale students went to work for the Chicago Mercantile Exchange as an assistannt to an active trader who was a former economics professor. After a few weeks, the young man asked about the long-run calculations that governed the trades. He was told ‘Sonny, my long-run is the next ten minutes.'”
Robert Solomon: Money on the Move (Princeton UP, 1999) p.14.


Belle Waring 05.13.07 at 7:42 am

as long as it’s still true that people in london used to irritate one another by saying “quoz!” and “shocking bad hat”, not to mention singing “cherries ripe” all the goddamn day, my faith in Mackay will remain strong.


Bob B 05.13.07 at 10:17 am

Belle – Quite so, which is why I posted the link to Mackay and why, too, I invoked the well-documented example of the South Sea Bubble for fear – if you’ll forgive the dreafully mixed metaphor – that babies disappear with the bath water if Dutch Tulip mania turns out to be more myth than historical fact. Stock market bubbles and crashes are for real – for an interesting tack on investment behaviour during the South Sea Bubble (please overlook the eccentricites of my London spelling), see Temin and Voth on Riding the South Sea Bubble:

I’ve not read it but the best available recent robust history of the South Sea Bubble seems to be: Richard Dale: The First Crash – Lessons from the South Sea Bubble (Princeton UP, 2004). For a review by Richard Sylla:

For another review of Dale’s book:


Richard 05.13.07 at 10:29 am

After reading the South Sea Bubble piece I don’t feel quite so bad about my wavering in 2000: I could see quite plainly that things were going south (sorry) months ahead of the crash, and yet I didn’t withdraw my investments in time – it’s good to see I’m in Newton’s company, there.


John Emerson 05.13.07 at 11:20 am

17: Yes, and with a little luck you can probably put together a list of horrible, stupid people who pulled their money out just in time and laughed at the losers.

Though I’m not sure that that’s quite the point we want to make….

I’ve known people who speculate in baseball cards. There are books put out listing the nominal values of cards. The nominal value of the “common card” is given some conventional value, probably in the neighborhood of 50 cents or a dollar, but actually it’s zero. A smart guy can more or less break even by looking for the few valuable cards.


dsquared 05.13.07 at 11:47 am

Myself, I’m waiting for Dsquared’s essay with endnotes about how American chocolate is traditional, natural and pretty damn near as good as any Dutch, Belgian or Swiss chocolate, because chocolate is, you know, an industrial product

Chocolate is obviously an industrial product (or at least, eating chocolate is) and I’m sure that there are some American brands of it which are at least as good as some Dutch, Belgian or Swiss brands.

I’d note in context, by the way, that the dot com bubble did not destroy the American economy, but there was still a dot com bubble.


Chris Bertram 05.13.07 at 12:15 pm

Nice use of “some” there, Daniel. There’s at least one brand of American-made chocoloate that’s better than or equal in quality to at least on brand of Belgian chocolate. A claim to be proud of!

(You can do the same for beer _easily_, the Belgian brand that will make the statement true is “Jupiler” which must be Flemish for “gnat’s piss”.)


Richard 05.13.07 at 12:18 pm

there are some American brands of it which are at least as good as some Dutch, Belgian or Swiss brands

I can vouch for this: I was downright surprised to find that Scharffen Berger is an American company. They and Vosges Haut Chocolat are miles ahead of any other large-ish scale producer and, IMHO, give Lindt a run for their money on quality, if not price. I don’t think there’s anyone stateside to touch Valrhona, though, and Dutch supermarket chocolate is still a whole lot better than Ghirardelli.

Of course, this is all subjective blah blah blah: maybe you really like Hershey’s and dislike other products. That’s fine. Just don’t bring it to my house.


Richard 05.13.07 at 12:19 pm

Erratum: should read; miles ahead of any other large-ish scale American producer.


John Emerson 05.13.07 at 1:30 pm

I draw the line at cat litter. If D^2 refuses to acknowledge the enormous superiority of Danish specialty cat litter, he’s just full of shit. During my recent Legos pilgrimage I happened into a cat-litter store and was dazzled by the quality and selection.


dsquared 05.13.07 at 3:20 pm

I don’t really like chocolate so this is all quite academic to me. “Does your mother know you’re out?” as they apparently used to say all day long in eighteenth century London.


Alan Kellogg 05.13.07 at 7:05 pm

I once sold $24.00 in Magic The Gathering cards for $200.00. The man who bought them said he expected to get $2,000.00 for them. Five payments of $40.00 each.

The day of the last payment he wanted to know if I’d be interested in buying the cards back. The bubble had just burst, and he was now expecting to get $40.00 for the lot.


Bernard Yomtov 05.13.07 at 7:52 pm

“The prize must surely go to the unknown soul who started ‘A Company for carrying on undertaking of great advantage, but nobody knows what it is.’

Isn’t this essentially the prospectus for some hedge funds?


trialsanderrors 05.13.07 at 10:37 pm

Disappointingly, it turns out that most of the stories are false.

And this is evidenced by what? Shoddy rebunkings of shoddy myths are almost as ubiquitous as shoddy myths, as the QWERTY dust-up or D²’s flawed retelling of the flawed history of the Budweiser brand has amply demonstrated.


dsquared 05.13.07 at 11:59 pm

everyone fucking hates me now because of that Budweiser thing, don’t they? It’s a quite unpleasant, if not exactly unfamiliar, sensation. Wait till the Wrexham local newspaper gets wind of it and we get a few dozen outraged Wrexhamites visting, then my misery will be complete.


John Emerson 05.14.07 at 2:07 am

We’re just waiting for your proof that Budweiser is better than Hamms.


Walt 05.14.07 at 4:18 am

Far from it, Daniel. I found your defence of Budweiser so inspiring that I want it to be true. The next time I have a party, I’m going to subject the guests to a blind taste test to find out.


Richard 05.14.07 at 6:14 am

this is evidenced by what? Shoddy rebunkings of shoddy myths are almost as ubiquitous as shoddy myths,

I imagine there may be some evidence in the book, which I’m disinclined to praise or damn until I’ve read it. If you like, I can point to my own review when I’ve done so.

BTW: “rebunking” strikes me as a useful term, possibly relevant to the conservapedia chatter upstream. Thanks.


fansnoli 05.14.07 at 10:57 am

bq. this is evidenced by what? Shoddy rebunkings of shoddy myths are almost as ubiquitous as shoddy myths,

I doubt you have read this book, let alone the notes or you would realise that Goldgar has gone back to the original documents in Haarlem, Amsterdam, Enkhuizen, Leiden and elsewhere to examine what they actually say.

It is shoddy to repeat mistakes made by people who read the documents in the 1920s. It is shoddy to repeat hoary myths that go back to Mayhew and beyond without substantiating them from the primary sources. The last charge you make against this book is shoddiness.


eudoxis 05.14.07 at 1:21 pm

Peter Garber debunked the myth of tulipmania in his Famous First Bubbles: The Fundamentals of Early Manias, published in 2000.


Bob B 05.14.07 at 3:57 pm

#32: “The last charge you [can] make against this book is shoddiness.”

Great. As a quick dip into this literature soon demonstrates, crucial subtext issues in all this relate to whether asset price bubbles are irrational and whether the Efficient Market Hypothesis holds up.

I’m entirely prepared to accept that claims about Dutch Tulipmania in the early 17th century owe more to myth than historical fact. But I’m far less willing to write-off the possibility of “irrational exuberance” in asset prices.

The South Sea Bubble literature reverts to that topical debate more starkly, starting with a famous contemporary commentary by Daniel Defoe:

“A year before the world’s first great stockmarket crash in 1720, Daniel Defoe wrote his famous condemnation of the broking community. The Anatomy of Exchange Alley (1719) describes in detail various alleged market manipulations and sham reports generated to push up stock prices to the advantage of the perpetrators. ‘Tis a compleat system of knavery; that ’tis a trade founded in fraud, born of deceit, and nourished by trick, cheat, wheedle, forgeries, falsehoods,’ he blustered.”

Sadly, I can’t find an online link to Defoe’s tract.


jarvis 05.14.07 at 5:54 pm

This book does different things from Garber’s one because it talks about the way the tulip craze fits into Dutch history and culture of the time. From what I’ve read of it, the debunking aspect is only a piece of what Goldgar is trying to do. There’s a lot there about relationship of tulips to art and the art market, a study of the way local communities worked, material on what the Dutch were worried about in this period (social change, for example).


Richard 05.14.07 at 7:22 pm

“The last charge you [can] make against this book is shoddiness.”

or: “The last charge you make against this book is [itself a mark of] shoddiness.”

careful with that interpolating iron.


trialsanderrors 05.14.07 at 10:04 pm

I doubt you have read this book

No I haven’t. It’s perfectly possible that the book is an accurate and in-depth investigation of the events, but I don’t see any evidence that either the FT reviewer or Chris probed this. If a core message of the book is “Don’t take exemplary stories on faith alone” it seems to have fallen on deaf ears.


Valuethinker 05.16.07 at 10:57 am


Unfortunately I was left with the impression from Garber’s book that in the sequel he will deny that there was ever a dot com/TMT bubble and crash.

There *was* a South Sea Bubble and it had big political impacts. And John Law’s invention of paper money (the French Louisiana Bubble) was also very real.

Economists like to say there are no bubbles, and if it was a bubble, we would only know afterwards.

But there’s a wealth of evidence there *are* bubbles. Everyone remembers the dot com one, (although in fact the media-telecommunications one was far, far larger), but this is only one of many– see John Brooks ‘The Go Go Years’ for the tech bubble – of 1960 to 1964. Any stock with ‘tech’ in the company name went through the roof.

Or see Shanghai’s stockmarket right now. Or the Saudi Arabian one until the middle of last year.

Comments on this entry are closed.