Tulip mania (Dutch: tulpenmanie) was a period during the Dutch Golden Age when contract prices for some bulbs of the recently introduced and fashionable tulip reached extraordinarily high levels. The major acceleration started in 1634 and then dramatically collapsed in February 1637. It is generally considered to have been the first recorded speculative bubble or asset bubble in history.
In many ways, the tulip mania was more of a socio-economic phenomenon than a significant economic crisis. It had no critical influence on the prosperity of the Dutch Republic (now the Netherlands), which was one of the world's leading economic and financial powers in the 17th century, with the highest per capita income in the world from circa 1600 to 1720.
The term tulip mania is now often used metaphorically to refer to any large economic bubble when asset prices deviate from intrinsic values.
Forward markets appeared in the Dutch Republic during the 17th century. Among the most notable was one centred on the tulip market. At the peak of tulip mania in February 1637, certain tulip bulbs sold for more than 10 times the annual income of a skilled artisan. The Semper Augustus was the most expensive tulip during the mania, which at its peak sold for ƒ10,000 (in guilders; equivalent to approximately €130,000 in 2024). Research is difficult because of the limited economic data from the 1630s, much of which comes from biased and speculative sources. Some modern economists have proposed rational explanations rather than a speculative mania for the rise and fall in prices. For example, other flowers such as the hyacinth also had high initial prices at the time of their introduction, which then fell as the plants were propagated. The high prices may also have been driven by expectations of a parliamentary decree that contracts could be voided for a small cost, thus lowering the risk to buyers.
The 1637 event gained attention in 1841 with the publication of the book Extraordinary Popular Delusions and the Madness of Crowds, written by Scottish journalist Charles Mackay, who writes that at one point 5 hectares (12 acres) of land were offered for a Semper Augustus bulb. Mackay claims that many investors were ruined by the fall in prices and that Dutch commerce suffered a severe shock. Although Mackay's book is often referenced, his account is contested. Many modern scholars believe that the mania was not as destructive as he describes.
Background and history
Dutch tulip business
The introduction of the tulip to Europe is often attributed to Ogier de Busbecq—the ambassador of Charles V, Holy Roman Emperor, to Sultan Suleiman the Magnificent—who sent the first tulip bulbs and seeds to Vienna in 1554 from the Ottoman Empire. These bulbs were soon distributed from Vienna to Augsburg, Antwerp, and Amsterdam.
Southern Netherlandish botanist Carolus Clusius is largely responsible for the spread of tulip bulbs in the final years of the 16th century; he planted tulips at the Vienna Imperial Botanical Gardens in 1573. He finished the first major work on tulips in 1592, in which he notes the colour variations. Their popularity and cultivation in the Dutch Republic started in earnest around 1593 after Clusius had taken up a post at Leiden University in the newly established Hortus Botanicus. He planted his collection of tulip bulbs in a teaching garden and his private garden in late 1593 and found that they were able to tolerate the harsher conditions of the Low Countries. Shortly thereafter, the tulip grew in popularity. The spring of 1594 is considered the tulip's first flowering in the Netherlands, despite reports of the cultivation of tulips in private gardens in Antwerp and Amsterdam two or three decades earlier. These tulips at Leiden eventually led to both the tulip mania and the tulip industry in the Netherlands. Over two raids, in 1596 and in 1598, more than one hundred bulbs were stolen from his garden.
The tulip was different from other flowers known to Europe at that time because of its intense saturated petal colour. The appearance of the nonpareil tulip as a status symbol coincides with the rise of the Dutch Republic's trade fortunes. No longer under Spanish reign, its economic resources could be channelled into commerce, and the Netherlands embarked on its Golden Age. Amsterdam merchants were at the centre of the lucrative East Indies trade, where one voyage could yield profits of 400%. Around this time, the ceramic tulipiere was devised for the display of cut flowers stem by stem. Vases and bouquets, usually including tulips, often appeared in Dutch still-life painting.
As a result, tulips rapidly became a coveted luxury item, and a profusion of varieties followed. They were classified in groups: the single-hued tulips of red, yellow, or white were known as Couleren; the multicoloured Rosen (white streaks on a red or pink background); Violetten (white streaks on a purple or lilac background); and the rarest of all, the Bizarden ('Bizarres') (yellow or white streaks on a red, brown, or purple background). The multicolour effects of intricate lines and flame-like streaks on the petals were vivid and spectacular, making the bulbs that produced these even more exotic-looking plants highly sought after. It is now known that this effect is produced when the bulbs are infected with a type of tulip-specific mosaic virus known as the "tulip breaking virus", so called because it "breaks" the one petal colour into two or more. Less conspicuously, the virus also progressively impairs the tulip's production of daughter bulbs.
The Semper Augustus was the most expensive tulip during the tulip mania; during the peak this tulip was sold for ƒ10.000 (~€130.000 in 2024). After seeing the tulip in the garden of Dr. Adriaan Pauw, a director of the Dutch East India Company, Nicolas van Wassenaer wrote in 1624 "The colour is white, with carmine on a blue base, and with an unbroken flame right to the top". Semper Augustus was actually not a tulip variety but rather a tulip affected by the tulip mosaic virus. With limited specimens in existence at the time and most owned by Pauw, his refusal to sell any flowers despite wildly escalating offers is believed by some to have sparked the mania. Historian Philipp Blom theorises in his book Nature's mutiny that the mania might also have been driven by the effects of the Little Ice Age, which left most other flowers dry and shrivelled by the temperature, while the tulip was the one which sustained itself.
Growers named their new varieties with exalted titles. Many early forms were prefixed Admirael ('admiral'), often combined with the growers' names: Admirael van der Eijck was perhaps the most highly regarded of about 50 so named. Generael ('general') was another prefix used for around 30 varieties. Later varieties were given even more extravagant names, derived from Alexander the Great or Scipio, or even "Admiral of Admirals" and "General of Generals". Naming could be haphazard and varieties highly variable in quality. Most of these varieties have since died out.
The tulips bloomed in April and May for about one week. During the plant's dormant phase from June to September, bulbs can be uprooted and moved about, so actual purchases (in the spot market) occurred during these months. During the rest of the year, florists, or tulip traders, signed forward contracts before a notary to buy tulips at the end of the season. Thus the Dutch—who developed many of the techniques of modern finance—created a market for tulip bulbs, which were durable goods. Short selling was banned by an edict of 1610, which was reiterated or strengthened in 1621 and 1630, and again in 1636. Short sellers were not prosecuted under these edicts, but forward contracts were deemed unenforceable, so traders could repudiate deals if faced with a loss.
Speculative period
As the flowers grew in popularity, professional growers paid higher and higher prices for bulbs with the virus, and prices rose steadily. By 1634 speculators began to enter the market, partly as a result of demand from the French. The contract price of rare bulbs continued to rise throughout 1636. By November, the price of common, "unbroken" bulbs also began to increase, so that any tulip bulb could fetch hundreds of guilders.
Traders met in "college" at taverns, and buyers were required to pay a 2.5% "wine money" fee, up to a maximum of ƒ3,- per trade. Neither party paid an initial margin nor a mark-to-market margin, and all contracts were with the individual counter-parties rather than with the town exchanges. The Dutch described tulip contract trading as windhandel ('air trade'), because no bulbs were actually changing hands. The entire business was accomplished on the margins of Dutch economic life, not in the exchange.
Tulip mania reached its peak during the winter of 1636–37, when some contracts were changing hands five times. No deliveries were made to fulfil these contracts because in February 1637 tulip bulb contract prices collapsed abruptly, and the trade of tulips ground to a halt. A contemporary satire suggests that the crisis started to unravel on February 3 in Haarlem, where an auctioneer failed to find willing buyers despite lowering the asking price several times. The actual circumstances of the crash are unknown. The collapse seems to have occurred by the end of the first week of February 1637, which caused disputes over the extant contracts. On February 7, tulip growers scrambled in Utrecht to elect representatives for a national assembly in Amsterdam. Their situation had become uncertain as the buyers no longer had any interest in honouring the contracts, and there was no legal basis for enforcing them.
By the end of February, the representatives gathered in Amsterdam for deliberations. They decided on a compromise where all contracts entered before December 1636 would be binding, but later contracts could be cancelled by paying a fee amounting to 10% of the price. The matter was brought before the court which declined to rule and referred the question back to the city councils. The Dutch legislature decided to cancel all contracts to allow fresh deals to be struck during the summer. In Haarlem the issue dragged on, since the government left it to the parties to solve their issues by arbitration or other means. In May the city ruled that buyers could cancel any extant contracts at a fee of 3.5% of the price. The Dutch court system remained busy with tulip disputes throughout 1639. In the end, most contracts were simply never honoured.
Available price data
The lack of consistently recorded price data from the 1630s makes the extent of the tulip mania difficult to discern. The bulk of available data comes from an anonymous satire, Dialogues between Waermondt and Gaergoedt, written just after the bubble. Economist Peter M. Garber collected data on the sales of 161 bulbs of 39 varieties between 1633 and 1637, with 53 being recorded in the Dialogues.
Ninety eight sales are recorded for the last date of the bubble, February 5, 1637, at wildly varying prices. The sales were made using several market mechanisms: forward trading at the colleges, spot sales by growers, notarised forward sales by growers, and estate sales. "To a great extent, the available price data are a blend of apples and oranges", according to Garber.
Mackay's Madness of Crowds
The modern discussion of tulip mania began with the book Extraordinary Popular Delusions and the Madness of Crowds, published in 1841 by the Scottish journalist Charles Mackay. He proposes that crowds of people often behave irrationally, and tulip mania is—along with the South Sea Bubble and the Mississippi Company scheme—one of his primary examples. His account was largely sourced from a 1797 work by Johann Beckmann titled A History of Inventions, Discoveries, and Origins. Beckmann in turn used several available sources, but all of them drew heavily from the satirical Dialogues that were written to mock the speculators. Mackay's vivid book was popular among generations of economists and stock market participants. His popular but flawed description of tulip mania as a speculative bubble remains prominent, even though since the 1980s economists have debunked many aspects of his account.
According to Mackay, the growing popularity of tulips in the early 17th century caught the attention of the entire nation; "the population, even to its lowest dregs, embarked in the tulip trade". By 1635, a sale of 40 bulbs for ƒ100,000 was recorded. By way of comparison, a "tun" (930 kg or 2,050 lb) of butter cost around ƒ100, a skilled labourer might earn ƒ150–350 a year, and "eight fat swine" cost ƒ240.
By 1636, tulips were traded on the exchanges of numerous Dutch towns and cities. This encouraged trade by all members of society. Mackay recounts people selling possessions in order to speculate on the tulip market, such as an offer of 5 ha (12 acres) of land for one of two existing Semper Augustus bulbs, or a single bulb of the Viceroy that he says was purchased in exchange for a basket of goods (shown in table) worth ƒ2,500.
Many individuals suddenly became rich. A golden bait hung temptingly out before the people, and, one after the other, they rushed to the tulip marts, like flies around a honey-pot. Every one imagined that the passion for tulips would last for ever, and that the wealthy from every part of the world would send to the Dutch Republic, and pay whatever prices were asked for them. The riches of Europe would be concentrated on the shores of the Zuyder Zee (Zuiderzee), and poverty banished from the favoured clime of the Dutch Republic. Nobles, citizens, farmers, mechanics, seamen, footmen, maidservants, even chimney sweeps and old clotheswomen, dabbled in tulips.
The increasing mania generated several amusing, if unlikely, anecdotes that Mackay recounts, such as a sailor who mistakes the valuable tulip bulb of a merchant for an onion and grabs it to eat. The merchant and his family hunt down the sailor to find him "eating a breakfast whose cost might have regaled a whole ship's crew for a twelvemonth"; the sailor is supposedly jailed for eating the bulb. However, tulips are poisonous if prepared incorrectly, taste bad, and are considered to be only marginally edible even during famines. This directly contradicts Mackay's claim that the tulip bulb had been "quite delicious".