Tulip Mania: The Crash That Wasn't
1637
Tulip mania is the classic tale of financial madness: in the 1630s the Dutch supposedly went so crazy for tulips that people traded houses for single bulbs, and the crash ruined the country. The real story is stranger, and much smaller.
Flowers worth a fortune
Tulips were new and fashionable in the Dutch Republic in the early 1600s. Rare bulbs with 'broken' streaked petals were especially prized. Smithsonian magazine says a Semper Augustus bulb sold for more than the cost of a fashionable Amsterdam house; Wikipedia says it peaked at 10,000 guilders. Both say prices collapsed in February 1637, when buyers stopped turning up.
The legend
The story of national madness comes mainly from the Scottish journalist Charles Mackay. Smithsonian and Wikipedia both quote his 1841 book Extraordinary Popular Delusions and the Madness of Crowds, which claimed the whole population, 'even to its lowest dregs', embarked in the tulip trade and ordinary industry was neglected.
Myth versus reality
Historian Anne Goldgar went back to the archives for her 2007 book Tulipmania. As Wikipedia summarises, she concluded the trade involved 'a fairly small group' and that most accounts rely on one or two pieces of contemporary propaganda and a great deal of copying. Smithsonian reports her finding that she could not find anyone who went bankrupt because of tulips. Some traders defaulted and contracts went unpaid, but the Dutch economy did not collapse.
Why the myth lives on
Tulip mania survives as a parable about bubbles and greed. It is often invoked whenever a new asset soars in price. The real lesson may be that a good story about financial ruin can spread far faster than the facts.