Tulip mania: the Dutch tulip bubble of 1637 and what historians now say

Education only, not financial advice. Figures come from official sources, each with its date; past market moves do not predict future ones. How we work

Tulip mania was a speculative boom in tulip bulbs in the Dutch Republic that peaked in early February 1637 and collapsed within days. Prices really did crash, but modern research shows the episode was far smaller than the popular story of a whole nation ruined by flowers.

It is usually listed as the first famous bubble, the starting point of most histories of stock market crashes. Because the evidence is thin and partly propaganda, the honest version comes with caveats.

What happened during tulip mania?

Tulips reached Europe from Turkey in the mid-1500s, and the Netherlands became the center for breeding new varieties. Collectors prized bulbs with feathered, flamed patterns in the petals. Economist Peter Garber explains that these patterns came from a mosaic virus and could only be passed on by budding the mother bulb, so a new pattern was scarce for years. Rare bulbs sold for high prices long before the mania: Garber cites a Semper Augustus bulb sold for 2,000 guilders in 1625.

The speculative phase came in the winter of 1636-37. According to Garber, a futures market in bulbs emerged in November 1636, meeting in local taverns. Buyers and sellers traded promissory notes for bulbs still in the ground, and a New York Fed account describes how these notes changed hands repeatedly before any bulb was delivered. In January 1637, Garber reports, the prices of some common varieties rose by as much as 25 times.

When did tulip mania end?

Garber identifies February 5, 1637 as the day of peak prices. A New York Fed account notes that an auction that day raised 90,000 guilders, at a time when the wealthiest merchants might have accumulated about half a million. Within days, in the first week of February an auction in Haarlem drew no bids even as prices were cut, and the market for bulbs simply ceased to exist.

Sources: Garber (1990); Federal Reserve Bank of New York, Liberty Street Economics (2013).

The aftermath was a legal mess. On February 23, growers proposed that buyers pay 10% of the agreed price. The courts banned tulip cases and asked that disputes be handled locally, so buyers and sellers had to reach settlements one by one.

How big was the crash?

The accounts differ. The New York Fed summary says that when bulbs could be sold at all, it was for 1% to 5% of their previous value. Garber found that for one common bulb, the Switser, the price fell from 0.17 guilders per aas (a unit of weight) on February 5 to 0.11 on February 6 and 9: a sharp drop, but still above the 0.035 recorded on January 23.

Garber also compared rare bulbs with 18th-century price patterns. Prized bulbs always lost value fast as growers multiplied them, and from February 1637 to 1642 the rare bulbs he tracked lost value at an average rate of 32% a year, close to the 28.5% he found for the 1700s. On his estimate, the crash itself could have accounted for no more than a 16% price decline in those rare bulbs.

Was tulip mania a real bubble? The historians' dispute

Most popular retellings come from Charles Mackay's book of 1841. Historian Anne Goldgar, in her 2007 book on the episode, argues that this tradition is based almost solely on propaganda, cited as if it were fact. Garber traces the same stories back to a few anonymous pamphlets written just after the collapse by critics of speculation.

Goldgar found that not everyone was involved: participants were connected to each other in specific ways. In her account most of the story "is not true": tulipmania did not destroy the economy or even the livelihoods of most participants. She sums it up as an event that might not have been a financial crisis but was a social and cultural one.

Garber goes further and questions whether "bubble" is the right word for the rare bulbs at all. His conclusion on the economy is plain: there is no evidence of serious economic distress, and histories of the period treat it as a golden age of Dutch development.

Why is tulip mania still cited today?

Tulip mania has become shorthand. An IMF Finance and Development article in 2018, for example, listed it with the South Sea Bubble and the dot-com boom as precedents that commentators cited when crypto-asset prices swung. The comparison works as a warning about prices rising on the hope of reselling to someone else. As evidence about the size of real crashes it is weak, because the data from 1637 are so thin. Better-documented collapses, such as the stock market crash of 1929, rest on daily prices and official statistics.

Questions readers ask