We watched the recently released film Tulip Fever last night. The main plot focuses on two pretty sexy love stories, but the more interesting backdrop is the speculative mania that swept Holland in the 1600’s known as Tulip Mania. Here is a direct link to the trailer.
The episode is described as one of the first recorded speculative bubbles in Charles Mackay’s famous, must-read book Extraordinary Popular Delusions and the Madness of Crowds (
1841). The contract prices for bulbs of the then recently introduced tulip, reached extraordinarily high levels before collapsing in February 1637. As shown on the left, at the peak of the madness, one bulb of rare varieties traded for 10x what a skilled craftsman could earn in 10+ years of work. At one point, 12 acres of farm land were pledged for just one bulb. (More recently, it has been argued that the scale of the mania was not as far-reaching as Mackay and others have reported. Yet the frantic trading of rare bulbs at exorbitant prices that ultimately collapsed, is undisputed).
The story is classic human behavior and well worth revisiting. Especially as the world is now in the midst of what will undoubtedly also be recorded as one of the greatest and most damaging financial bubbles in history.
Of course, you could, if starving, eat tulip bulbs. Pieces of paper and digital entries representing ‘ownership’ in grossly inflated securities on the other hand–not even edible.
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