Remembering Tulip Mania: When Flowers Were Worth More Than an Average Salary
For a few years in the 17th century, tulip bulbs were more valuable than fine luxury goods and even some people’s salaries. Read on to learn about Tulip Mania and the impact it had on modern economics.
During the 1630s, the Dutch Republic was in the midst of its Golden Age, a period in which they imported many foreign goods, perhaps most notable of which was the tulip plant. This flowering species came from the area currently occupied by Turkey and, due to its lovely petals, soon spread throughout Europe. In the Dutch Republic, both plant experts and average citizens eventually became enamored with this flower and its many varieties to a degree never seen before.
The story goes that beginning in 1633, the Dutch admiration for the tulip plant neared its apex. In that year and the four to follow, tulips became so sought after that their price began to soar. In response, many Dutch families were quick to purchase tulip bulbs with the goal of selling them later at a considerable profit. This strategy depended on the value of tulip bulbs continuing to rise steadily, which it did for a considerable time.
Between 1633 and 1637, the prices of tulip bulbs became so immense that they rivaled people’s annual salaries. Some reports about this period also indicate that the cost of tulips was so high that a single bulb would be seen as a fair and suitable replacement for an entire dowry upon a Dutch couple’s marriage. As such notions about tulips permeated deeper throughout the Dutch Republic, more and more families entered the tulip bulb market with the hope of receiving a substantial return in a relatively short time frame.
Eventually, at the beginning of 1637, investors began to doubt that tulips’ value would continue to grow. In response, the value of this flower is said to have declined precipitously in a matter of a day or so. Naturally, the sudden drop in value would mean near economic ruin for all who invested too heavily while the price was artificially high. Speculation about the aftermath of the Dutch tulip crash indicates that the negative financial impacts were pervasive, setting back many who lived in the republic.
Today, many economists and historians point to Tulip Mania as the first instance of widespread market speculation, or what many refer to more casually as an economic bubble. Such speculation occurs when investors assume an asset, such as tulip bulbs, will continue to increase in price, despite not increasing in intrinsic value. Tulip Mania, as it is understood by most historical perspectives, is an accurate representation of this well-known economic concept.
However, the modern reanalysis of Tulip Mania provokes some doubt about how accurately we understand the period. The primary telling of the Tulip Mania tale comes from a book called “Extraordinary Popular Delusions and the Madness of Crowds,” which was written by a Scottish poet and novelist named Charles Mackay, over 200 years after the Tulip Mania events were said to take place.
In his book, Mackay gives his depiction of the Tulip Mania fervor, mentioning that one famous tulip variety called Semper Agustus could sell for 3,000 florins. Estimates suggest that this sum could equate to more than $1 million in modern United States currency. Mackay also details a grand economic downturn following Tulip Mania, which may have occurred to a much lesser degree than what he described.
Regardless of the nuanced historical facts about Tulip Mania, this period continues to serve as a representation of what can happen when a large group of investors speculates about assets boosting in value. This time frame also reveals the surprising importance we can place on plants that do nothing more than add beauty to our gardens. As such, the memory of Tulip Mania continues to hold relevance in the minds of investment experts and gardeners alike.
