Is the Dutch Tulip Bulb Mania Story Fake News?

Whenever a new technology gets over-hyped, the ‘Dutch Tulip Bulb Mania’ story always gets trotted out.

The story: From 1634 to 1637, prices of tulip bulbs skyrocketed due to speculation. Then, prices suddenly crashed. At its peak, tulip bulbs were traded at more than ten times the annual income of a skilled craftsman, according to the story. This is considered to be one of the earliest recorded economic bubbles. Every time hype appears to over-promise on some new technology (think of the dot-com boom and subsequent crash), this colourful story is revived in countless business publications.

But we shouldn’t let hype endanger the underlying true value of the technology. Keep in mind that even after the (supposed) bottom fell out of the market, tulip bulbs were still worth something. And there’s evidence that this story is at least partially an urban legend, as Dave Roos tells us in The Real Story Behind the 17th-Century ‘Tulip Mania’ Financial Crash.

Roos tells us that Charles MacKay wrote about “The Tulipomania” in his book Memoirs of Extraordinary Popular Delusions and the Madness of Crowds. The economic crash of 1637, at the end of the supposed economic bubble, had a devastating effect on the Dutch economy, MacKay claims.

But historian Anne Goldgar argues that MacKay’s tales of financial ruin are exaggerated. Goldgar found that the tulip market was relatively small and short-lived, and involved few people. MacKay, Goldgar writes, relied on satirical poetry and song that ridiculed tulip buyers, and made the mistake of treating them as fact. MacKay’s tales of distraught people losing fortunes and drowning themselves in canals are probably, she says, almost entirely fictional. She was unable to find a single case of an individual who went bankrupt after the tulip market crashed.

That’s not to say the entire story is made up. Goldgar found evidence in court records from the of buyers reneging on contracts and as a consequence destroying their reputations.

The upshot of the whole affair, says Goldgar, was:

“Tulips were something that was fashionable, and people pay for fashion. The apparent ridiculousness of it was played up at the time to make fun of the people who didn’t succeed.”

So perhaps a lot of the bubble fable is driven by this sentiment: