Tulip Mania is known as a primary example of a bubble.
The Beginning of Tulip Mania
It all started in Holland, in the seventeenth century. Years before (in 1593), a botany professor from Vienna brought to Leyden, a city in the Dutch province of South Holland, some unusual plants from Turkey. The Dutch were fascinated with this new product, but were not very happy with its exorbitant price.
One night, a thief stole the bulbs from the professor’s house – the bulbs were then sold for a cheaper price but at greater profit (the professor’s costs were higher).
Over the next decade, the tulip became a popular but expensive item in Dutch gardens, but many of these bulbs were affected by a nonfatal virus called mosaic. The virus would change the appearance of the bulb, adding to it, contrasting colored stripes that looked like flames.
The Dutch adored these variations of bulbs which were called bizarres. The more bizarre the bulb, the higher its price. Soon after, tulipmania set in.
Bulb merchants tried to anticipate the next tulip “look” and would buy a large stockpile to anticipate an increase in price. The prices of the tulip-bulbs rose wildly.
The more expensive they became, the more people saw them as intelligent investments.
In Mackay’s book, Extraordinary Popular Delusions and the Madness of Crowds, we are told that the normal industries of Holland were forgotten about in favor of tulip-bulb speculation.
“Nobles, citizens, farmers, mechanics, seamen, footmen, maid-servants, even chimney sweeps and old clothes women dabbled in tulips.”