Organizations and Markets

Tulip Mania: Not So Manic After All

4 August 2007 at 12:06 am Peter G. Klein 1 comment

| Peter Klein |

Popular and scholarly accounts of the Dutch tulip bubble of 1636-37 — including Robert Shiller’s — greatly exaggerate the magnitude of the crisis. It seems the tulipmania literature tends to rely not on primary sources or other authoritative documents but on popular pamphlets that appeared shortly after the crisis, designed to ridicule tulip-market participants.

So says Larry Neal, reviewing Anne Goldgar’s Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age for EH.Net. Goldgar’s careful archival research demonstrates, among other things, that tulip-market participants were not hapless dupes but experienced merchants who knew how to price risks and who were part of a small, close-knit community that relied on strong social ties to enforce good behavior. Indeed, tulip transactions were highly complicated ones governed by detailed contractual arrangements designed to protect both buyers and sellers. Goldgar “notes that the participants in the tulipmania largely worked out the terms of the broken contracts among themselves with little impact on the rest of the Dutch economy. . . . So the tulip trade in Holland revived and continued to prosper, as it does to this day.”

Entry filed under: - Klein -, Business/Economic History, Institutions, Myths and Realities.