The Tulip Bulb Mania

Extraordinary Popular Delusions And The Madness Of Crowds

Some of you may have heard of the speculative tulip bulb craze that gripped seventeenth-century Holland.  At the peak of the mania, a single tulip bulb sold for the equivalent of $150,000 - $1,500,000, depending on which historian you believe. And if you’ve never heard the story, you won’t believe it’s true. But it is. It really happened, and if we’re not careful, it could happen again.

The story begins in 1559 when Conrad Gestner brought the first tulip bulbs from Constantinople to Holland and Germany, and people fell in love with them. Soon tulip bulbs became a status symbol for the wealthy — because they were beautiful and difficult to get. 

Although early buyers were people who truly prized the lovely flowers, later buyers were merely in for the money, and it didn’t take long for speculators to get involved. They created trading activity, and eventually, tulip bulbs were placed onto the local market exchanges. By 1634, the rage for owning tulips had spread to the middle classes of Dutch society. Merchants and shopkeepers began to vie with one and another for single tulip bulbs. 

How bad did it get? Well, at the height of tulip mania in 1635, a single tulip bulb was sold for the following items:

• four tons of wheat
• eight tons of rye
• one bed
• four oxen
• eight pigs
• 12 sheep
• one suit of clothes
• two casks of wine
• four tons of beer
• two tons of butter
• 1,000 pounds of cheese
• one silver drinking cup.

At first the Dutch government refused to interfere. Instead, it simply advised tulip holders to agree among themselves on some plan to stabilize prices and restore public confidence. These plans failed. Eventually, assembled deputies in Amsterdam declared null and void all contracts that were made at the height of the mania, meaning prior to November 1636. Tulip contracts made subsequent to that date were settled if buyers paid merely 10% of the prices to which they had earlier agreed.

But tulip prices continued to fall. Next, the provincial council in the Hague was asked to invent some measure to stabilize tulip prices and public credit. Those efforts failed. Tulip prices again fell even lower. In Amsterdam, judges unanimously refused to honor tulip contracts, regarding them as gambling activities. The court rules that gambling debts were not debts in the eyes of the law. No court in Holland could — or would — enforce payment. Tulip collectors, speculators, and gamblers who had tulips at the time of the collapse were left to bear ruinous losses.

Tulip prices soon plunged to less than the present equivalent of a dollar each. Imagine having bought a tulip for $76,000, only to discover six weeks later that it was now worth less than one dollar. Commerce in Holland suffered a severe shock, and did not recover for many years.

Now I know what you are saying, “Come on! … who on earth could possibly have gotten caught up in that?” I know how you feel. After all, we’re talking tulips here – not food, shelter, clothing, or firearms for defense! We’re talking TULIPS! What practical value could tulips have had in Holland in 1636? And what could cause people to lose such control of their senses?

Well, if you think the story is too preposterous to be true, trust me it did happen. And believe me, too, when I tell you that it could happen again. No way, you say? Well, I have only two words for you:  Beanie Baby.