Published by EH.NET (August 2007)

Anne Goldgar, Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age. Chicago: University of Chicago Press, 2007. xx + 425 pp. $30 (cloth), ISBN: 0-226-30125-9.

Reviewed for EH.NET by Larry Neal, Department of Economics, University of Illinois at Urbana-Champaign and London School of Economics.

Anne Goldgar, Reader in Early Modern History at King’s College, has written a scholarly study based on original archival sources of the first speculative bubble in the history of western capitalism, the tulipmania in the Netherlands, 1636-37. She takes to task all previously published work on this most famous, but least well-documented, of financial bubbles and intends here to lay the basis for all future research. This would include work, presumably, by art, cultural, social, and general historians of the Dutch as well as research by economic historians, as Goldgar lays out in detail the artistic, cultural, social, and mercantile contexts of the tulipmania before confronting the details of the mania itself. The resulting product will be a standard reference for all historians whenever they deal with this episode in Dutch financial history.

The five substantive chapters cover the introduction of the tulip into Dutch society in the 1590s and the rise of an expert class of liefhebbers, the integration of tulip appreciation into Dutch art and genteel Dutch culture, the rise of an active market in varieties of tulip bulbs among the liefhebbers and the bloemisten of Holland that culminated in the tulipmania, and then the consequences of the collapse of the market in 1637. Of most interest to economic historians will be the chapters on the rise of the market for tulips and the repercussions of the collapse of the brief mania covering the winter of 1636-37. “Grieving Money” (chapter 4) describes the complexities of the tulip trade. “Tulips, depending on the type, bloom in April, May, or June, and last only for a short period, perhaps a week or two. After they had blossomed, it was thought imperative to lift the tulips out of the ground, dry them off, and keep them wrapped up indoors. Otherwise they might be damaged in the ground. When September came, the tulips were replanted, and they remained in the earth until after the next flowering season the following summer. … If a bulb was sold to another party, it would still stay underground until the summer, so that sometimes, if bulbs were sold on, the tulips would be found in the gardens of third or fourth parties ? and the same problem of immovability faced those who sold property where tulip bulbs were planted” (p. 204).

All this detail demonstrates to Goldgar, and to this reviewer, that the possibilities for either seller or buyer to renege on any given offer were manifold, given the difficulties of maintaining continuity of each contract on each bulb and the need for each party to trust the other’s integrity in the absence of witnesses at the stages of blooming, lifting, storing, and re-planting. Hence the prevalence of rouwkoop, the “grieving money” that a buyer reneging on his or her contract would offer to the disappointed seller when some plausible ground was found for reneging on the earlier agreement. The prevalence of the plague in 1636 created another layer of uncertainty in maintaining an intact chain of evidence for each contract.

“Bad Faith” (chapter 5) reviews a large amount of literature that emerged in the immediate aftermath of the tulipmania and argues that while some flights of metaphor related the evanescence of the tulip and the uncertainties of commerce to the presence of the plague, most simply focused on the stupidity of people dealing in such an item. Goldgar’s previous chapters, however, demonstrate that most bloemisten were already well-seasoned merchants, knowledgeable in assessing commercial risks. She concludes that the damage was not so much financial as emotional. Given the tight-knit Dutch merchant community and the dominance of Mennonites in the tulip trade, the widespread defaults on the tulip contracts that followed the collapse of the tulip bubble and the resumption of trade in other goods shook the confidence of the Dutch in the strength of their communal ties.

These chapters are bracketed by an introduction and an epilogue. The introduction argues that the tulipmania has previously been badly misunderstood as a result of popular pamphlets that ridiculed the episode in the most extravagant terms, but which have excited the imagination of later authors trying to address a popular audience, usually after a financial crisis. She fleshes out this assertion in footnotes to the later chapters. For example, fn. 9, p. 329, “I should note here in the strongest terms that the documents printed by Posthumus in his 1927 and 1934 articles are not to be trusted.” And, fn. 20, p. 361, “In Amsterdam, of those whose trade could be identified, thirty-three were merchants, two were wine-sellers … two were involved in insurance as well … four were professional florists, one was an art dealer, one was possibly an artist … and one was a furrier.” For Haarlem, the center of the tulip trade then, she finds 43 merchants, ten bleachers, one dyer, 18 bakers, 10 brewers, 11 innkeepers, and a couple dozen assorted professionals, and only one (1) servant. All this to make her point that those involved in the tulip mania were knowledgeable individuals, experienced in the ways of commerce and nascent capitalism. Her evidence is from notarial archives, however, which are naturally biased in favor of the middle classes able to afford legal services, so proponents of the madness of crowds may still believe that the mania was widespread among the lower orders who simply despaired afterwards.

Footnote 34, p. 365, however, takes to task Robert Shiller’s brief comments about the tulipmania in his book, Irrational Exuberance (Princeton, NJ: Princeton University Press, 2000), p. 246, n. 2, by pointing out that “there is nothing in the periodical press about tulipmania … and the pamphlet literature was not only not a form of news but was issued almost entirely after the crash.” In fn. 10, p. 371, she states, “Many of the prices modern authors have cited for tulips, including several of the picturesque ones involving trading goods for tulips come from Abraham Munting’s 1671 Waare Oeffening, which in turn copied them straight from the pamphlet Samen-spraeck tusschen Waermondt ende Gaergoedt; they are not to be trusted.” Fn. 11, p. 371, goes further, “… one of the many inaccuracies of Posthumus’ transcription of this document is in his rendering of a price, when he said that the price of the Maxe or Hagenarers sold in this transactions was f4000, rather than the actual f400.” Regarding the prices used by Peter Garber in Famous First Bubbles: The Fundamentals of Early Manias (Cambridge, MA: MIT Press, 2000), she expresses reservations, “both because they rely on an apparently unchecked use of the error-ridden Posthumus and because Garber trusts the prices in the printed pamphlets about the Alkmaar auction of February 5, 1637, about which, lacking any real manuscript confirmation, I remain somewhat skeptical” (ibid.). In the text corresponding to this footnote, she notes that the Alkmaar auction was held in the middle of winter. “No tulips were available for inspection, and, for that matter, no bulbs could be taken away. Everything remained in Alkmaar until the summer, and, importantly, none of the high prices that so dazzled spectators were actually paid on the spot” (p. 204).

The epilogue, “Cabbage Fever,” notes that the participants in the tulipmania largely worked out the terms of the broken contracts among themselves with little impact on the rest of the Dutch economy. Her argument culminates with a dispute in 1645 when two of the most litigious disputants from the 1637 episode were again involved in a dispute over settling a contract between about the payment for and delivery of a tulip bulb. Only this time their roles were reversed; the previous seller was now a recalcitrant buyer and the previous buyer took on the role of disappointed seller. So the tulip trade in Holland revived and continued to prosper, as it does to this day.

Larry Neal is Professor Emeritus, University of Illinois at Urbana-Champaign, Visiting Professor, London School of Economics, and Research Associate, NBER.