History of the Tulip Mania

Tulip Mania, also known as the Tulip Craze or Tulpenwindhandel (in Dutch), was a burst of economic speculation on tulip bulbs, which took place in 17th century Holland. The bulbs of the delicate flower went through a sudden and vertiginous climb in price. The interplay of supply and demand prompted exorbitant prices for the rarest and most sought-after varieties. A single flower could cost the same as an entire brewery or a dowry for a bride. Today, Tulip Mania is often cited as the forerunner to other economic "bubbles," in which prices skyrocketed within a relatively short time and, eventually, plunged back.

How the Tulip "Bubble" Grew

Tulips were first brought back to Europe from Turkey in the mid-1500s. In Holland, where a tradition of collecting rare or exotic objects was already well-established, tulips become the hottest new item. At the start of the 17th century, the Amsterdam stock exchange opened, creating an official forum for trading grain and other futures. By the 1630s, brokerages had formed that specialized exclusively on tulips, the most favored of the flowers. Among the factors leading to the tulips' popularity was the difficulty of growing certain rare varieties. In addition, a new strand of virus had recently affected tulip bulbs, causing the flowers to develop distinctive and appealing patterns in coloration. The short supply of these particular varieties meant an increase in demand and a rapid increase in value. During the period of the tulips' climbing value, interest rates also dropped sharply, meaning that it was possible to trade tulip "futures" without any margin at all.

Tulip Mania's Fallout

During the peak of Tulip Mania, the prices were rising so quickly that many sold their lands, homes or life savings to secure just a few bulbs. Within one month, the price of tulip bulbs increased as much as twenty times. However, eventually, as investors began selling off their bulbs and the available supply increased, the value of the bulbs dropped again. In something like a "domino effect," suddenly everyone was trying to sell the bulbs, panicked over their plummeting value. As a result of Tulip Mania, those who suffered the worst blows afterwards were the growers, who were left with highly devalued goods on their hands. The government in Amsterdam essentially nulled numerous contracts, which allowed many of the speculators to renege on their initial intentions to buy the bulbs, at inflated prices. In addition to the tulip growers themselves, the financial records for Amsterdam between 1635 and 1637 report double as many bankruptcies as during the two years prior.

Tulip Mania as the First Speculative Bubble

Tulip Mania is widely recognized as the first speculative bubble. The value of a tulip bulb increased at an alarming rate, much like an inflated soap bubble. However, this value did not remain tied to the intrinsic worth of the flower. Rather, it was guided by the market dynamics of supply and demand. In other words, to further the metaphor, the bubble was full of nothing but air. Today, some economists differ on how to most correctly characterize Tulip Mania. The "craze" actually had relatively little influence on the whole of Dutch finance, so it was hardly a financial crisis. Some economic historians even question using the term "bubble", as the prices of tulips did somewhat correspond to the rarity of particular flower varieties and difficulty of reproducing them. At any rate, although tulips and other flowers remained popular and valuable, the tulips never regained their momentarily sky-high values. In other words, the sudden spike in value was at least partially unhinged from the actual worth of the flowers. The magnitude of this craze was most apparent in the final throes of the "mania". For example, the fairly common Witte Croonen bulb, not a difficult flower to grow, rose to twenty-six times its value in one week and dropped to one-twentieth that amount, one week later.

Fun Facts

• The most expensive bulb of Tulip Mania was known as the Semper Augustus.
• Hans Bollongier's (1623-1672) Still Life with Flowers, painted in 1639, features the prized Semper Augustus.
• The Viceroy was one tulip listed in a Dutch catalog from 1637. Its bulb was priced at between 3,000 and 4,150 guilders.
• The Admirael van der Eijck, a tulip from the 1637 catalog of P. Cos., sold for 1045 guilders on February 5, 1637.

• Tulip Mania: How a Country Went Totally Nuts for Flower Bulbs - This article describes the ascent of Tulip Mania, with images.
• Tulip Mania - Learn more about the historical context surrounding the Dutch tulip craze.
• The Truth about Tulip Mania - An in-depth report examines the stages of Tulip Mania.
• Tulip Mania: Costly Flowers - A pictorial overview offers relevant images alongside a recap of Tulip Mania.
• Lessons from History: Tulip Mania and the "Bubble" - This detailed article explores the specific people affected by Tulip Mania.
• When the Tulip Bubble Burst - A book review explains the tulip bubble in comparison to other historical trends.
• Tulip Mania: Money, Honor, and Knowledge in the Dutch Golden Age - A book review gives an overview of the economic phenomena.
• Was Tulip Mania Irrational? - This magazine article offers an economic look at the actual causes behind Tulip Mania.
• Famous Bubbles - This listing explains Tulip Mania in terms of other economic bubbles.
• Tulip Mania: 17th Century Wealth and Speculation in the Netherlands - This article provides a brief overview of Tulip Mania and speculation's role in the markets.

Article by Chad Kremp