Tulip Mania
What Actually Happened in the Dutch Bulb Market
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Mackay's famous account of crowd madness gets examined in chapter four, showing how modern economists have revised his story. Chapters five through six present different explanations for the price movements, including rational economic behavior and natural market volatility. Chapter seven discusses why flower prices naturally fluctuate, while chapter eight critiques these various theories.
Legal changes during this period get covered in chapter nine, along with social factors that contributed to the mania. The final chapter explores how historians have re-evaluated what actually happened. Anyone interested in economic bubbles, market behavior, or early financial history will find this a useful guide.
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In 1554, Ogier de Busbecq, the ambassador of Charles V, Holy Roman Emperor, sent the first tulip bulbs and seeds to Vienna from the Ottoman Empire. This introduction marked the beginning of the tulip’s spread across Europe. The bulbs, along with other new plant life such as potatoes, peppers, tomatoes, and various vegetables, made their way into the continent during that century. From Vienna, they quickly moved on to Augsburg, Antwerp, and Amsterdam.
Carolus Clusius, a Southern Netherlandish botanist, introduced tulips to the Netherlands after establishing a garden at the Vienna Imperial Botanical Gardens in 1573. He published the first major work on tulips in 1592, documenting their color variations. In 1593, Clusius accepted a position at Leiden University and began cultivating tulip bulbs in both a teaching garden and his personal plot, where they adapted well to the challenging climate of the Low Countries. By spring 1594, tulips were blooming in the Dutch Republic. His garden was robbed twice—first in 1596 and again in 1598—resulting in over a hundred stolen bulbs.
The tulip stood out among European flowers for its vivid, saturated colors. When the nonpareil variety emerged, it quickly became a sign of wealth and status, matching the growing prosperity of the Dutch Republic. After breaking free from Spanish rule, the Netherlands entered its Golden Age, with Amsterdam merchants dominating the lucrative East Indies trade—where a single voyage could bring returns of 400%. Around this time, a new type of vase called the tulipiere was created, designed to display cut tulips stem by stem. These flowers often showed up in Dutch still-life paintings, part of a broader cultural moment.
Tulips became highly desirable luxury items, with many new varieties appearing quickly. They were sorted into groups: Couleren, which were single-colored like red, yellow, or white; Rosen, showing white streaks on a red or pink base; Violetten, with white streaks on purple or lilac; and the rarest, Bizarden, featuring yellow or white streaks on red, brown, or purple backgrounds. The colorful patterns on petals were striking and eye-catching, making bulbs that produced such blooms especially prized. These effects came from a tulip-specific mosaic virus called the "tulip breaking virus," which caused one petal color to split into two or more. This virus also slowly reduced the plant’s ability to produce new bulbs.
The Semper Augustus stood as the most prized tulip of the mania’s height, fetching ƒ10.000—around €130.000 by today’s standards. In 1624, after viewing it, Nicolas van Wassenaer wrote that its color was white, with carmine on a blue base, and an unbroken flame reaching to the top. It wasn't actually a tulip variety but a flower affected by the tulip mosaic virus. Only a handful of these existed, mostly held by Dr. Adriaan Pauw, whose refusal to part with his specimens, even under rising bids, is believed to have fueled speculation. Historian Philipp Blom theorized in Nature’s Mutiny that the Little Ice Age may also have driven the frenzy, as it dried up most other blooms while tulips were the ones that endured.
Growers in the Dutch tulip trade gave their new bulb varieties grand, often pompous names. Early on, many were prefixed with “Admirael,” sometimes combined with the grower’s name—like Admirael van der Eijck, who was perhaps the most highly regarded among about fifty such varieties. Another prefix used for around thirty kinds was “Generael.” Later, names became even more extravagant, drawn from figures like Alexander the Great or Scipio, or titles like “Admiral of Admirals” and “General of Generals.” The naming was often inconsistent, and the quality of the varieties could vary greatly. Most of these named tulips have since disappeared.
The tulips bloomed for just a week in April and May, but the real trading happened from June through September, when bulbs could be moved and the spot market was active. During the rest of the year, florists and traders made forward contracts before a notary to buy tulips at season’s end. The Dutch were developing early financial techniques, creating a market for these durable goods. In 1610, an edict banned short selling, which was later reiterated in 1621, 1630, and again in 1636. Though short sellers weren’t prosecuted, forward contracts could be repudiated if traders faced losses.
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As tulips became more popular, growers were willing to pay increasingly high prices for bulbs infected with the virus, and the cost kept climbing. By 1634, French demand helped draw speculators into the market. Prices for rare bulbs continued rising through 1636. Then, by November, even common "unbroken" bulbs started going up in price, so that soon any tulip bulb was worth hundreds of guilders. People used forward contracts to buy bulbs at the end of the season.
Traders gathered in taverns to meet in what they called "college," where buyers had to pay a 2.5% "wine money" fee — capped at ƒ3 per trade. There was no initial margin required, nor any mark-to-market margin, and all contracts were made directly with individual counterparties, not through an exchange. The Dutch referred to this tulip contract trading as windhandel, which means "air trade," because no actual bulbs changed hands. This whole system operated on the edges of formal Dutch economic life, never taking place inside the official exchange itself.
Tulip mania peaked during the winter of 1636–37, when some contracts changed hands five times without any actual delivery of bulbs. By February 1637, prices collapsed suddenly, halting all tulip trade. A satire claims the crisis began unraveling on February 3 in Haarlem, where an auctioneer couldn’t find buyers even after lowering the price multiple times. The exact cause of the crash remains unknown, but it happened by the end of the first week of February. Disputes over existing contracts soon followed. On February 7, tulip growers in Utrecht rushed to choose representatives for a national assembly in Amsterdam, as buyers stopped honoring agreements and no legal way existed to enforce them.
By the end of February, representatives met in Amsterdam to sort things out. They agreed that any deal made before December 1636 would stand, but contracts signed after that could be cancelled for a 10% fee. The Court didn’t take a side and sent it back to the city councils. The Dutch legislature later stepped in and canceled all contracts so new ones could be made in the summer. In Haarlem, they let the parties work it out themselves through arbitration. Then, in May, the city ruled buyers could cancel deals for 3.5% of the price. Courts stayed busy with tulip cases all through 1639. In the end, most contracts were simply ignored.
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The lack of consistent price records from the 1630s means we can’t fully know how big the tulip mania really was. Most of what we have comes from a satirical work called Dialogues between Waermondt and Gaergoedt, written shortly after the bubble burst. Economist Peter M. Garber gathered information on 161 bulbs from 39 different tulip varieties, with 53 of those sales mentioned in the Dialogues.
On February 5, 1637, the last day of the Dutch tulip bubble, transactions took place using several methods: growers made immediate sales, others arranged deals in advance through formal documents, and some items were sold during estate settlements. The data from this final day includes a number of sales, but according to Garber, "to a great extent, the available price data are a blend of apples and oranges."
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The modern idea of tulip mania comes from a book called Extraordinary Popular Delusions and the Madness of Crowds, written by Charles Mackay in 1841. He argued that crowds often act irrationally, using tulip mania as one of his main examples, along with the South Sea Bubble and the Mississippi Company scheme. His account came largely from a 1797 book by Johann Beckmann called A History of Inventions, Discoveries, and Origins. Beckmann based his work on satirical Dialogues meant to mock the speculators. Mackay’s book became widely read among economists and stock market followers, even though economists have since shown many parts of his story were wrong.
Mackay described how, in the early 1600s, tulips became so popular across the Dutch nation that even the poorest citizens joined the trade. By 1635, a single deal involved 40 bulbs sold for ƒ100,000. To put that into context, a tun of butter was valued at around ƒ100, a skilled worker earned between ƒ150 and ƒ350 per year, and eight fat swine cost ƒ240.
By 1636, tulips were being traded across many Dutch towns and cities, drawing everyone into the market. People began selling their belongings just to get involved in speculation, like when someone offered 5 hectares of land for a single Semper Augustus bulb, or when a Viceroy bulb was bought for a basket of goods worth ƒ2,500, as Mackay reported.
The lure of sudden wealth drew everyone into the tulip market like moths to a flame. People flocked to the marts, each hoping to strike it rich, believing the frenzy would never end. They thought the entire world’s affluent would come to the Dutch Republic, paying any price for these flowers. The Zuyder Zee would become the center of Europe’s fortune, lifting the region out of poverty forever. From nobles to chimney sweeps, from farmers to maidservants, all took part in the tulip trade.
Mackay collected strange stories about the tulip mania, like one about a sailor who thought a merchant’s valuable tulip bulb was just an onion and ate it. The merchant and his family reportedly tracked the sailor down, finding him “eating a breakfast whose cost might have regaled a whole ship's crew for a twelvemonth.” The sailor was said to have been jailed for his crime. But Mackay claimed the bulb had been “quite delicious,” which contradicts what we know: tulips are poisonous if not prepared right, taste terrible even in famine, and are only barely edible.
People were buying bulbs and selling them again at ever-increasing prices, hoping to make a profit. This could only keep going as long as there were buyers willing to pay those high prices and take the bulbs. By February 1637, traders no longer found anyone willing to pay the rising costs. When that reality hit, demand dropped fast, and prices crashed—the bubble burst. Some traders were left with contracts to buy tulips at prices now ten times what they'd originally cost, while others ended up with bulbs worth only a fraction of what they’d paid.
In Mackay’s account, the desperate tulip speculators turned to the Dutch government for help. The government allowed people to cancel their future purchase contracts by paying a 10% fee. Efforts were made to find a solution that would satisfy everyone, but those attempts failed. According to Mackay, the mania finally ended when individuals were left holding the bulbs they had at the crash’s end. No court would force anyone to honor the contracts, since judges considered the debts to be from gambling and therefore not legally enforceable.
Mackay noted that similar tulip manias happened elsewhere in Europe, but none grew as extreme as the one in the Netherlands. He believed the drop in tulip prices left a lasting chill on the Dutch economy, affecting the country for many years after the burst.
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Mackay’s version of tulip mania went largely unchallenged until the 1980s, when new research began to question his account. Anne Goldgar, in her 2007 study Tulipmania, argued that the event was confined to only a small group of people, and that most historical descriptions were based on just a few original documents and a lot of copied information. Peter Garber added that the trading of common tulips was little more than a pointless winter pastime, something played by a population dealing with plague and using the market as a distraction.
While Mackay’s account suggested that many people from across society took part in the tulip trade, Goldgar’s study of old contracts showed that at its height, the market was mostly run by merchants and skilled craftspeople who were well-off but not part of the nobility. Even at the peak, the economic impact of the bubble was small. Goldgar tracked down many major buyers and sellers, and found that fewer than half a dozen ended up facing financial trouble. And even then, it’s unclear if tulips were actually to blame. This makes sense because although prices had soared, no money changed hands between buyers and sellers. So sellers never actually made profits. Unless they'd already spent money on other things expecting those profits, the drop in prices didn’t cause anyone to lose anything.
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Prices for tulip bulb contracts did rise and then fall between 1636 and 1637, but that kind of price movement doesn’t automatically mean a bubble formed and crashed. For it to count as an economic bubble, buyers and sellers would have had to agree on prices that went above the actual value of the bulbs. Economists have suggested several reasons why the sharp increase and decrease might not have been a true bubble, even though some tulips, like the Viceroy Tulip, were worth more than five times the price of an average house at the time.
The price jumps in the 1630s happened while the Thirty Years’ War quieted somewhat. By 1634 and 1635, German and Swedish forces were losing ground in southern Germany, then Cardinal-Infante Ferdinand of Austria pushed north. After the Peace of Prague, the French and Dutch began funding Swedish and German Protestants against the Habsburgs, and took control of the Spanish Netherlands in 1636. So initial price increases made sense as demand rose. The drop that followed was quicker and sharper. Sales data mostly vanished after prices crashed in February 1637, but some later records show bulb values kept falling for many decades.
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Garber looked at tulip prices and compared them to hyacinth prices from the early 1800s, when hyacinths took over as the trendy flower. Back then, florists competed fiercely to grow the most beautiful hyacinths, driving up demand and prices. But as people grew used to hyacinths, interest waned and their cost dropped sharply. Within about thirty years, the most expensive hyacinth bulbs were worth only one to two percent of what they had been at their peak.
In 1989, Garber pointed out that a small group of prototype lily bulbs sold for ƒ1 million, showing that flowers have always had the power to reach extraordinary prices. This kind of spike didn’t happen because growers could quickly respond by planting more bulbs—since the price increase came after the bulbs were already in the ground for the season, there was no way to boost supply in time.
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Some economists say that Garber’s theory doesn’t fully explain what happened during the tulip mania, pointing out that the same dramatic price swings occurred in regular tulip bulb contracts, not just the specific ones mentioned in Garber’s account. Others have noted that during this time, there was a noticeable increase in deposits at the Bank of Amsterdam, which suggests a broader rise in the money supply. These factors may help explain the bubble's behavior, but they don’t completely account for the sharp rise and fall in tulip prices. The situation remains complex, with multiple elements at play beyond what one theory can capture.
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In 2007, Earl Thompson questioned Garber’s account of the Dutch tulip mania, highlighting that the speed of price drops couldn’t be explained by it. While other flowers usually fell by about 40% each year, tulip contract prices plunged at an annualised rate of 99.999%. Thompson suggested another cause: a decree being considered by the Dutch parliament since late 1636. It had been proposed originally by investors who had lost money because of a setback in the Thirty Years' War involving Germany. The proposed law would have altered how tulip contracts operated.
On 24 February 1637, the guild of Dutch florists, which had been self-regulating, made a decision that later became law through the Dutch Parliament. They ruled that any futures contracts written after 30 November 1636 and before the cash market reopened in early spring would now be treated as option contracts. The buyers of these futures were no longer required to take delivery of the tulips. Instead, they only had to pay the sellers a small, fixed percentage of the contract value.
Before this parliamentary decree, anyone who bought a tulip contract—what we'd call a forward contract today—was legally required to follow through and purchase the bulbs. Then the law changed. The decree altered these agreements so that if the market price dropped, the buyer could choose to pay a penalty instead of taking delivery of the bulbs. In modern terms, this transformed the forward contracts into options contracts—favorable to buyers.
Thompson says the price spike in tulip bulb contracts before the February 1637 decree wasn’t just sudden—it was driven by buyers who knew what was coming. Even though the final 3.5% premium didn’t settle until February 24, Thompson explains that by late November, information had entered the market and pushed prices up. At that point, contracts were no longer seen as fixed prices to be paid later, but as call-option strike prices instead.
Thompson explains that those who suffered most from the shift in contract rules were the investors who had purchased forward agreements before November 30, 1636. They believed their deals would gain from the February 1637 ruling. These people ended up taking an extra risk, betting on the final prices buyers would pay for their options. This gamble had nothing to do with how much the tulip bulbs were actually worth.
Thompson examined the details of how tulip bulb deals were structured, looking at the actual financial outcomes in forward and options agreements. He found that the prices didn’t deviate much from what economic theory would expect. According to him, the way contract values moved before, during, and after the period known as "tulipmania" showed something significant: "Tulip contract prices before, during, and after the 'tulipmania' appear to provide a remarkable illustration of efficient market prices."
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The story of tulip mania has lived on through the centuries, with new versions of Extraordinary Popular Delusions still being published, including introductions by notable figures such as financier Bernard Baruch in 1932, financial writer Andrew Tobias in 1980, psychologist David J. Schneider in 1993, and journalist Michael Lewis in 2008.
Goldgar argues that although tulip mania may not have constituted an economic or speculative bubble, it was nonetheless traumatic to the Dutch for other reasons: "Even though the financial crisis affected very few, the shock of tulip mania was considerable. A whole network of values was thrown into doubt." The Dutch elite believed owning special tulip bulbs was essential, driving prices upward despite the flowers themselves holding little worth. In the 17th century, it was unimaginable to most people that a common flower could be valued more than a year’s income. The idea that summer blooms' prices could swing wildly in winter disrupted the very concept of value itself.
Many of the accounts we have of the damage caused by tulip mania come from anti-speculative pamphlets, which were later reported by Beckmann and Mackay. These weren’t written by people who actually lost money in the bubble, but were mostly driven by religious concerns. The situation was seen as a moral failing—a sign that focusing too much on earthly things, rather than heavenly ones, could lead to serious consequences. The upheaval was viewed as a perversion of the natural order, with some suggesting that "concentration on the earthly, rather than the heavenly flower could have dire consequences."
Nearly a century later, in about 1720, when the Mississippi Company and the South Sea Company crashed, tulip mania showed up in satires about those financial meltdowns. When Beckmann described tulip mania in the 1780s, he compared it to the failing lotteries of his time. Goldgar notes that even modern popular books on markets, like Burton Malkiel's A Random Walk Down Wall Street from 1973 and John Kenneth Galbraith's A Short History of Financial Euphoria from 1990—written after the 1987 crash—used tulip mania as a moral lesson.
Tulip mania has been cited as a comparison during major financial bubbles, like the dot-com crash of 1995 to 2001 and the subprime crisis of 2007 to 2010. In 2013, Nout Wellink, who was president of the De Nederlandsche Bank, said Bitcoin was “worse than the tulip mania,” noting, “At least then you got a tulip, now you get nothing.” Even so, Daniel Gross has pointed out that if economists are right in explaining the mania away as an efficient market, then business writers might have to remove Tulip Mania from their list of bubble examples.
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