Tulip mania

In the winter of 1636–37, contracts for rare tulip bulbs in the Dutch Republic changed hands at astonishing prices, some above ten times a skilled craftsman's yearly earnings, before the market collapsed abruptly in February 1637. Long told as the first great speculative bubble and a parable of collective folly, the episode has been reassessed by modern historians, notably Anne Goldgar, who argue that the popular account is greatly exaggerated and that the crash ruined very few people.

Tulips reached Europe from the Ottoman Empire in the sixteenth century; the Habsburg diplomat Ogier de Busbecq is often credited with sending bulbs to Vienna in 1554. The botanist Carolus Clusius planted a collection at Leiden's new botanical garden in 1593, and the flower soon became a status symbol in a Dutch Republic growing rich from trade. The most prized varieties had vivid streaks and flames on their petals, an effect now known to be caused by a virus. Because such bulbs multiplied slowly, they were scarce. The celebrated Semper Augustus reportedly sold for 10,000 guilders at the height of the craze.

Tulips flower for only about a week in spring, and bulbs can be lifted only in summer. For the rest of the year traders signed contracts to buy bulbs at the end of the season. From about 1634, speculators joined growers and collectors in this trade, meeting in tavern "colleges" where deals were struck without deposits or margins. The Dutch called it windhandel, "trading in air", since no bulbs actually changed hands. Prices for rare bulbs rose throughout 1636, and by November even ordinary bulbs were fetching hundreds of guilders.

At the peak, some contracts were resold five times. In the first week of February 1637 prices collapsed; a contemporary satire places the turning point at a Haarlem auction on 3 February where no buyers could be found. Growers met in Amsterdam later that month and proposed that recent contracts be cancellable for a fee of 10 per cent. In May Haarlem allowed buyers to escape contracts for 3.5 per cent of the price. Disputes lingered in the courts until 1639, but most contracts were simply never settled.

The episode became famous through Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds, published in 1841. Mackay described a whole nation, down to its poorest members, gambling on bulbs, told colourful stories such as a sailor who ate a precious bulb mistaking it for an onion, and claimed that the crash left the Dutch economy depressed for years. His account drew, through Johann Beckmann's eighteenth-century history, on anti-speculation pamphlets that were largely moralising propaganda.

Since the 1980s economists and historians have challenged this picture. In her 2007 study Tulipmania, Goldgar examined archived contracts and found that the trade was confined to a fairly small group of well-off merchants and craftsmen. She identified fewer than half a dozen participants who suffered financial trouble, and even for them tulips may not have been the cause. Since money rarely changed hands before the collapse, few had real gains to lose. Others point out that the price rises coincided with a lull in the Thirty Years' War. The economist Garber compared the pattern with the rise and fall of hyacinth prices, while Earl Thompson argued that prices reacted rationally to a planned legal change turning firm contracts into something closer to options. The episode had no serious effect on the prosperity of the republic, then one of the world's leading economic powers.

Even so, Goldgar argues that the episode shook Dutch ideas of value and morality. Satirists invoked it during the South Sea and Mississippi crashes around 1720, and "tulip mania" is still used for bubbles from dot-com shares to Bitcoin.

Our 1650 map shows the Dutch Republic, then at the height of its Golden Age, about a decade after the crash; our 1600 map shows it in the years when tulips first spread there.