For the Tulip lovers and investors

2011.03.25

Tulip mania or tulipomania was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed. At the peak of tulip mania, in February 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble. The term "tulip mania" is now often used metaphorically to refer to any large economic bubble (when asset prices deviate from intrinsic values).
The event was popularized in 1841 by the book Extraordinary Popular Delusions and the Madness of Crowds, written by British journalist Charles Mackay. According to Mackay, at one point 12 acres (5 ha) of land were offered for a Semper augustus bulb. Mackay claims that many such investors were ruined by the fall in prices, and Dutch commerce suffered a severe shock. Although Mackay's book is a classic that is widely reprinted today, his account is contested. Many modern scholars believe that the mania was not as extraordinary as Mackay described, with some arguing that the price changes may not have constituted a bubble.

Well, I'm sold (obviously). Thank you for showing the continuation of a tulip's life cycle. We tend to ignore that part.

revenant · 2011-03-25: 04:06

You might want to add the breakthroughs in mathematics (hedging, functional differentials, futures and, just possibly, calculus) prompted by the tulip bubble. The mess we're in since 2007 can be blamed on Dutch tulip mania.

revenant · 2011-03-25: 05:03