Tulip Mania
reading up on my new building, I notice a serious discussion/argument on the role of speculators in a free market economy.
Someone brings up tulips, tulip mania to be precise. Apparently, the first “significant speculative bubble” occurred from 1636-37 in the Netherlands, over tulip bulbs. Tulips quickly grew in popularity throughout Europe during that time, seen as the Rolex or Hamptons summer home of their time. French speculators quickly escalated demand, and the Dutch actually created a futures market around bulbs.
At the peak of their popularity, a speculator paid as much as 12 acres of land for a single bulb. Bulbs would go for between 3,000 and 4,200 guilders; a skilled craftsman at the time earned about 150 guilders a year.
Economists still argue today whether tulip mania actually constituted a bubble. “For tulip mania to have qualified as an economic bubble, the price of tulips would have become unhinged from the intrinsic value of bulbs.” I can’t see how anyone could argue that a bulb would be worth what they paid, but I’m no economist.
I’d love someone to explain this to me in more detail. Intrigued.
