Economics

Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, Mackay Charles (1814-1889)

Article retrieved from: http://www.econlib.org/library/Mackay/macEx3.html 

Chapter 3- provides background on the introduction of the tulip bulb:

  • Introduced into Western Europe around the middle of the sixteenth century.  
  • Conrad Gesner claimed to have originally seen the tulip in 1559 Augsburg.

Image result for Conrad GesnerImage result for 1559 Augsburg

  • The tulip belonged to Councellor Herwart, a famous man who collected rare exotics.
  • Tulips were sought after by the rich in Holland, Amsterdam and Germany.
  • The first plants in Britain were brought from Vienna in 1600.
  • It wasn’t until the year 1634, that the tulip started to annually increase in reputation; where the tulip became a popular among the wealthy.
  • The middle class of society started on the trend to own tulips, and merchants and shopkeepers began to stock them.
  • The rage of the Dutch for the possession of the tulip was so great caused the people to neglect ordinary industry, for the tulip trade.
  • In the year 1635, the mania increased, as people invested an average of 100,000 florins into the purchase of 40 roots.
  • In became common to sell them in the form of their weight (perits).

 

The following is a list of the various articles and their values for the purchase of a single root of the rare tulip called Viceroy:

florins.
Two lasts of wheat 448
Four lasts of rye 558
Four fat oxen 480
Eight fat swine 240
Twelve fat sheep 120
Two hogsheads of wine 70
Four tuns of beer 32
Two tons of butter 192
One thousand lbs. of cheese 120
A complete bed 100
A suit of clothes 80
A silver drinking cup 60
 
 Total value: 2500

 

  • In the year 1636, the marts for their sale were registered on the Stock Exchange of Amsterdam.
  • Being listed on the stock exchange caused new speculation to occur and fluctuations in prices.
  • These people envisioned the tulip demand to last forever and most were willing to pay whatever price were asked for them.
  • Houses and lands were offered for sale at low prices, converting property into cash, to invest in these flowers.
  • While, the riches of Europe were concentrated on the shores of Zuyder Zee.

Image result for Zuyder Zee 1600

  • Foreigners also became attracted to the tulip and came to Holland, bringing riches with them.
  • All the asset prices rose, from houses, horses, land, to other luxuries.
  • The operations were extensive, therefore there was drawn up a code of laws that governed the dealers.
  • The more wise, began to realise that this folly could not last forever and began to sell their tulips at a profit, with the idea that somebody must loose in the end.
  • This idea spread, and prices began to fall, confidence in the market was destroyed.
  • There were failed attempts to hold public meetings, in order to restore public credit.
  • Some suggested deputies must be sent to consult with the government, first the government refused to intervene, as the contracts were seen as gambling transactions created in the height of the mania.
  • While, still in the year 1636, tulips were publicly traded on the London Stock Exchange, and also in Paris did these people attempt to recreate Tulipmania, only partially succeeding.

 

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