The Joe Walker Podcast - Rational Minds Part 2: The Myth Of Tulip Mania - Anne Goldgar

Episode Date: December 17, 2020

Anne Goldgar is an historian and holds the Van Hunnick Chair in European History at the University of Southern California Dornsife.Show notesSelected links Follow Anne: Website | Twitter Tulipmania: Money, Honor, and Knowledge in the Dutch Golden, by Anne Goldgar See omnystudio.com/listener for privacy information.

Men, wrote the Scottish journalist Charles Mackay, think in herds. It will be seen that they go mad in herds, while they only recover their senses slowly and one by one. My name is Joe Walker and three years ago, trying to understand Australia's obsession with residential real estate, I began researching housing bubbles. I read almost everything I could find. Increasingly, I came to view the question of bubbles as not just a topic of interest to the fortunes of my country, but a vehicle to explore deep questions of human nature. There's a long literature that gleefully lays bare the madness of crowds, from Mackay to Galbraith, Minsky and Kindleberger to Schiller and Chancellor. But it left me with a nagging question. No one in a bubble ever thought she was crazy.

So what is going on here? In this series, I'm using the prism of financial bubbles to tackle an eternal question. What does it mean to be a rational person? I'll be guided by five world experts who will show me that we're not quite so befuddled as popular narratives would have us believe. I'm inviting you to come with me on this journey to reconsider what you might have been told and to give rational minds a second chance. I used to be kind of sane

I used to act kind of normal I couldn't complain Now it's never the same This episode presents a revisionist history That kind of normal, I couldn't complain. Now it's never the same. This episode presents a revisionist history of the famous Dutch tulip mania. And if you enjoy revisionist history as a genre, you will love Blinkist's new Shortcasts product, which presents the key learnings from podcasts such as Malcolm Gladwell's famed Revisionist History. As you know, this series is proudly sponsored by Blinkist, which is an app that condenses the key insights from non-fiction books into 15-minute text and audio explainers. Well, now Blinkist is extending

that same methodology to long podcast episodes, presenting them in 15 minutes. Blinkist does this by directly collaborating with podcast creators. In the case of Gladwell, he personally shares the highlights from his own podcasts with you. I've listened to all of Gladwell's shortcasts, but there are many other famous podcasts with their own Blinkist shortcasts. It's perfect if you want something a bit more bite-sized, but no less insightful or entertaining. Head to Blinkist.com slash Swagman, where you can check out their shortcasts. And if you sign up via Blinkist.com slash Swagman, you'll also get 25% off an annual

subscription and to try Blinkist premium Free for seven days. You're listening to the Jolly Swagman Podcast. Here's your host, Joe Walker. Ladies and gentlemen, boys and girls, swagmen and swagettes, welcome to part two of this series on rational minds. In the film Wall Street Money Never Sleeps, the sequel to the 1987 hit that earned Michael Douglas an Academy Award for his portrayal of Gordon Gekko, Gekko greets Sheila Booth's character Jake in an apartment overlooking Manhattan. Before long, they're talking about the Dutch tulip mania of 1636-37. Gecko wistfully wanders over to a framed painting of the famous flowers

hanging on his wall, as Jake hangs on his words. Relationships, you know, they're like bubbles. They're fragile. It's like these tulips. This is the greatest bubble story of all time. Back in the 1600s, the Dutch, they get speculation fever to the point that you could buy a beautiful house on a canal in Amsterdam for the price of one bulb. They called it tulip mania. Then it collapsed. You buy 10 bulbs for two dollars people got wiped out but you know

who remembers as it happens we all remember thanks in no small part to financial media but also to any person who seeks to impart an aroma of erudition by referencing what is commonly regarded as the world's first and perhaps most colorful speculative bubble. Yes, the tulip mania is invoked whenever financial speculation is in question. Tulip-studded warnings dotted the op-ed pages of broadsheets during the dot-com bubble. Films like Tulip Fever and Wall Street Money Never Sleeps promote a story of reckless mania. Even TED-Ed has a YouTube a story of reckless mania. Even Ted Ed has a YouTube video about tulip mania.

It has over 640,000 views and counting. Financial historians have given tulip mania pride of place. In his 1987 article on bubbles in the New Palgrave, Charles Kindleberger included it as one of the two most famous bubbles in history. In the seventh edition of Mania's Panics and Crashes, Kindleberger's co-author Robert Alaba counts Tulip Mania as the first of the Big Ten financial bubbles. In The Real Price of Everything, Michael Lewis includes Charles Mackay's coverage of the Dutch bubble

among six economic classics worth rediscovering, alongside Keynes, Malthus and Smith. There's no doubt that tulip mania is firmly rooted in our imaginations. Its memetic quality is perhaps thanks to the fact that tulips seem so intrinsically outlandish as objects of speculation. Houses and stocks, sure, but bubbles in bulbs? As John Kenneth Galbraith puts it in his short history of financial euphoria, nothing more improbable ever contributed so wonderfully to the mass delusion here examined. From their first entry into Europe in the 16th century, tulips were considered collector's items. But it was in the period starting around the summer of 1636 that prices for some bulbs shot up, only to plummet in early 1637. Given that bulbs were

buried underground during that time of year, the market in their trade was essentially a futures market. The popular understanding of tulip mania can be traced back to Charles Mackay's Extraordinary Popular Delusions in the Madness of Crowds, first published in 1841. Mackay's salacious rendering of the event sets the tone for all the other accounts that would follow in his footsteps. Here's one quote from Mackay to give you a taste. Many individuals grew suddenly rich. A golden bait hung temptingly out before the people, and one after another they rushed to the tulip marts like flies around a honeypot. The goal of this series is to push back against the notion that bubbles hinge on people being unhinged. So what's my problem

with tulip mania? Obviously it represented a bout of immense irrationality. It's one of the most famous examples of financial irrationality of all time. Or is it? The decision to include this episode at number two in this series is deliberate. I'm trying to soften you up. If I can convince you to reconsider the Dutch tulip mania, then I've opened the door to the reconsideration of bubbles in general. You see, it turns out that all the popular histories of the tulip mania, including Charles Mackay's, are based on a set of contemporaneous satirical pamphlets issued by the Dutch government in the wake of the event. Remember last episode when I said financial history was written by the victors? Now, to be sure, something did happen in the Netherlands between 1636 and 1637.

The very existence of satirical pamphlets presupposes the need to satirize something. But whether that something was irrational is another question altogether. Were tulip speculators really Mackay's flies to the honeypot? Or were they little different to today's art collectors swarming around an overpriced Banksy or Brett Whiteley? This episode seeks to answer that question. Our guest is Anne Goldgar. Anne is an American historian and expert of 17th and 18th century European cultural and social history. She holds the inaugural Van Hunnock Chair in European History at the University of Southern California, and she is the author of one of my favorite books, Tulip Mania, Money, Honor, and Knowledge in the Dutch Golden Age.

The first half of this conversation explores the broad facts of the tulip mania. The second half explodes the myth. I hope you enjoy. Anne Goldgar, welcome to the show. Thank you very much. It's great to be here. How did you become interested in the tulip mania? It was something which had always been in the back of my mind as someone who was studying Dutch history and who was interested in the role of the Netherlands,

really, in the early modern cultural and economic world. And it was just a topic that seemed to me to bring together so many different aspects of Dutch history between the interest in art and interest in science and its economic prominence in the 17th century. So it just seemed to bring so many things together. Tell me about the story of Clusius and how tulips originally came to the Netherlands. Clusius was a botanist who worked at the court of the Holy Roman Emperor in the late 16th century. And he encountered tulips first when they were brought back to the court of the emperor from Turkey by the ambassador to the Ottoman Empire, Buzbek. And this was part of an influx of many interesting products from foreign countries

during the 16th century, including a lot of flowers and other plants. And the first tulips were grown in Augsburg in the gardens of a very important banker, a member of the Fugger family. And he brings them eventually, once he loses his job actually at the court, he brings him to the Netherlands where he was employed as the director of the first botanic garden at the new University of Leiden. However, there are also stories that tulips come in another way, but Clusius is usually the person who's credited with this, And he certainly seems from his correspondence, which I've read, to be at the center of a whole network of people who are interested in flowers

and in rare plants. So what is going on in the Netherlands at the time? And why were people so interested in flowers? The Netherlands was a new country. It was in the middle of a revolt against its previous masters, the Spanish, the Habsburg Empire. And everything was very kind of upset at the time and many people were moving around the country, in particular merchants were moving from the south to the north, and that brought a lot of money, capital, and financial daring, in a way, from the southern Netherlands to the north. It also brought taste in art, and it brought people who came from a sort of humanist education, which was interested in 1590s, the Northern Netherlands in particular becomes a place which is really rising very quickly in its financial abilities, in its

capital, in its trade. And that means that there are a lot of people who have money to spend on luxury objects. And I think that there's an interesting confluence of factors here, because there are people who have money, but they could spend it on anything. And so what do they spend it on? They spend it on, obviously, they spend it on nice clothes, they spend it on nice houses, but they spend it on things like that, which are relatively restrained, actually, compared to what you might find, for example, in France. But also quite a few merchants and people that you might not expect to have those kinds of tastes started to buy art. And some of those same people, and there's a fascinating crossover between the people who buy art and the people who buy tulips. They buy

flowers, rare flowers, and get interested in them. And I'm not talking about a huge number of people, but a lot of people got interested in art. The art market was enormous, really, in the Netherlands in the 17th century. But there is this group of people who start to get interested in flowers as well. And you start to see this happening really from the early part of the 17th century. But it really starts to pick up quite a bit in the 1620s and into the 1630s when the growth of the tulip market really starts to spread. And what's so interesting about tulips in particular? Tulips are interesting partly because people hadn't really seen anything like this before. I mean, it seems odd because tulips are so commonplace now as a flower,

but they were of an interesting large shape. But the main thing about them was that they changed and that they were, they came in different colors. They came in variegated colors, that is, they came in stripes, in speckles, in spots, and what were called flames. And that was the type of tulip that people were really excited about was tulips, were weren't just plain colored but tulips which were feathered speckled and so on and what was interesting about them was that they would grow as single colors for a certain period of time and then suddenly they would one year they would they would change and that excitement I think really was fascinating so they felt exotic but

they also there was this unpredictability about them which I think people was fascinating. So they felt exotic but they also there was this unpredictability about them which I think people liked in some ways although in other ways people didn't like the unpredictability because sometimes they didn't come up the way that they were expected to and that sometimes caused lawsuits. And the variegation of the tulips was caused by a disease and people obviously had no understanding of this at the time so they had all of these exotic theories as to what caused the tulips to change in color yes they didn't know what what the reasons were and um they thought that they could make it happen um and they probably could make it happen but not in the ways that they chose i mean people did

everything from uh from you know cutting open a tulip and trying to dye it with ink and then putting the tulip bulb back together again to see how it would grow, which really is not effective. Or it had many other ideas about breeding. And they were, I mean, people had skills with plants, but they really didn't understand this. What they did understand was that a tulip which became variegated might not last that long. That is, a tulip plant. There was an idea that this was a kind of swan song. But on the other hand, I think people had the hope that the tulips that they had that were coming up feathered or striped would last for more seasons. Otherwise, I think they wouldn't have risked their money on them.

Just explain how the bulbs work, how long they need to stay on the ground, how they multiply, and how long they can be out of ground before they need to be buried again. Tulips that grow up variegated have to be grown from seed and that instead of from a bulb. And that means that they have to stay in the ground and grow for about seven to 10 years before they will start to do the things that the tulip growers wanted them to do. And that was an important factor, I think, in terms of not expanding the trade any bigger than it already was expanded. On the other hand, you could obtain tulips that would grow in a way that pleased people by cutting off the sort of excrescences, they're called offsets, on the bulbs.

The bulbs would grow sometimes with little extra bits on that were growing off of them, which would be new tulips. And so a heavy bulb would be one that would go for more money because of the idea that that could then be multiplied. And so that is one factor. Another thing which is important about the tulips is that it was certainly believed at the time that they needed to be dug up in the summer and kept out of the ground and then returned to the ground in the autumn in order to make them flourish. And this was actually very important in regulating the course of the crash when the crash happens in 1637, because the interest in doing something about it,

the interest in suing people, in approaching people to try to get them to behave in the way that one wanted them to, that is to pay up, was important. The seasonality of it was important at that point. It was, it meant that although there was a crash in 1637, that most of the activity in terms of people trying to get money out of each other was happening in the summer at the time when people would normally have been obtaining the bulbs. And this is important in thinking about what kind of trade this was. It's often called a futures trade. But the fact

is that the timing of the trade and of the way in which this particular event unfolded had everything to do with the ideas about when tulips would and wouldn't be in the ground. And so during the fall and winter of 1636, 1637, the tulips were not actually available for anybody to handle. They were buried in gardens. And that meant that people were exchanging tulips that they were not going to receive until later, which sounds like a futures trade. But the other point about it was that the price was agreed at the point of sale, but the money was not paid until the actual goods and money were exchanged. And that meant that if the price increased, then the general

price increased of bulbs, the people who had sold earlier might feel bad about the fact that they had sold when they could have sold for higher, which caused lawsuits in the autumn of 1636. It also meant that in the summer of 1637, when the price had already fallen, people who had bought the tulips didn't want to receive them because they would still have had to pay the high price that they had agreed in, say, October or December of 1636 or January or early February of 1637. When people were thinking about potential profit, that depended entirely on whether they thought they could sell the tulips on later, not whether they think that they would have a different price to pay when they actually exchanged the goods. And I mean, the way that you can tell that this is the case is that in the summer when

the tulips are out of the ground, you simply bought them like you'd buy an apple at a supermarket. You know, you pick up the apple and you pay your money. And that's exactly what happened in the summer of 1636, for example. People simply exchanged goods for money. It was just because the tulips were unavailable in the autumn and winter and spring, that things turned out the way that they did. And in fact, this was also an issue when the tulips came up because of uncertainty about how they were going to look, that sometimes they did come up looking different from what people said they had been promised, at which point they were also lawsuits because people said this doesn't look like what I thought it was going to, so I don't want to pay. Obviously, you went back to the archives and read a lot of these lawsuits and the

correspondences involved. What were some of the main themes or grievances that recurred in these correspondences? What were people talking about and what were they focusing on? People were interested in what the tulips looked like. They were interested in whether the tulips were the kind of tulips that experts would say were good. And that was one of the things I thought was fascinating was there was a very quick sort of standardization of understanding of what was a good tulip and what wasn't. Even though this is a new product and this was a purely aesthetic judgment, it was one that developed very rapidly that the good tulips were the striped ones, the good tulips were healthy and so on. And so people, you know, and certain people became known to be experts. And I thought that that was very interesting from a sort of history of science point of view, that there was this idea of expertise in tulip culture.

And the people who were experts were not necessarily professional gardeners. They were simply people who had got involved in the trade. There was also the issue of whether somebody had actually paid or had promised to pay something or what they had promised to pay. And so what I found was that there were two really big themes here, which had to do with the value of tulips. What were they worth? How did you determine that? And the other was the question of trust. Who could you trust? How well did you know the people that were trading with you? How much did you, how did you judge whether these people were trustworthy or not? Were you trading with the same social group that you normally would? And the answer was that eventually that became less the case. And how do you judge trust?

And I thought that both of those things were really important in thinking about the Netherlands in the 17th century, because these are issues which come up constantly in a country which is very dependent upon credit, a country which is very dependent on the flow of money and which in which trade is the at least in the western part of the country trade is the main driver of the economy and so these are issues that come up in everybody's dealings every day. And that's actually true, of course, you know, throughout any society, which is based on a capitalist market, that trust and value are going to be the big issues. And they absolutely were central here. prized varieties of bulbs were the Semper Augustus, the Viceroy, and the Admiral van der Eyck. I have a friend, Gabe, who is a short seller who named his firm after the Viceroy. But my understanding, Anne, was that the Semper Augustus was the most prized bulb of all. Is that correct? Well, Semper Augustus became important to historians looking at this because it was written about in the 1620s, not in the very, very early days of newspapers,

about things that were happening in the world, and particularly that were interesting to people in the Netherlands. It was in Dutch. And Wassenaar's newspaper was really only about, otherwise about things like the Thirty Years' War and politics. But suddenly he starts to talk in around 1623 about the fact that people were paying a lot of money for tulips and mentioned the Semper Augustus particularly, talking about the fact that a certain merchant had cornered the market on this type of tulip and that there were only 12 of them and that he refused to sell any and so on. And this is practically the only mention of interest in tulips at this point. And I think that because of that, and because it was in a printed source instead of in an archival source, Sempergussus became famous. It was the kind of

bulb that produced flowers that were of the type that people liked, that is red and white striped. And that's the same with the other two varieties that you mentioned. This is what people liked. Red and white striped was, you know, one of the best things you could get. But actually, when I look at the mid-1630s, I'm not seeing Semper Augustus. That is, its day seems to be past. Or maybe it's just that the person who owned them never did sell them on, or that they died off, or someone else probably knows whether they were sent for Augustus later. But that's not really of huge importance during the mid-1630s. I guess Gabe was right after all. So when the tulips or the agreements to purchase tulips were being traded,

where did the trading physically occur? It could occur anywhere. Trading could occur anywhere. There were places that became known for tulips, but the place that it didn't happen was on the stock exchange. There was already a stock exchange in Amsterdam. Tulips never played a part in that. And so people would trade them in each other's houses. They would trade them in each other's gardens, which was a reasonable place to do it because you'd say, here, look at my tulip. Isn't that great? Would you like to buy it? Or you would say, you know, you can have this when it's ready to take out of the ground. They would take place in the offices of notaries who might make up a contract. Some were traded by contract, some were not. But the places that started to develop as locations for tulip trading were taverns. And there were certain taverns where

people would gather for this, where people knew that you could find tulips and tulip traders. And so there were certain taverns in various cities where this happened, like Harlem, which is really the central trade, and Amsterdam, and Horn, in Kousa, Alkmaar, Delft. Every place had its sort of tulip taverns and people would come in and they would find that there was an auction going on, which is not always the way that it worked, but in taverns that is what happened.

And there were people that gathered there as well who sort of decided that they were going to oversee this trade and they called themselves colleges. And they were a sort of unofficial committee to decide whether what was being done was fair. We see this advancement of expertise that certain people are setting themselves up as experts, in this case, experts on how trading should occur, which, again, isn't that unfamiliar if you think about how trade also worked in other types of goods, that there were people who judge quality, there were people who judge fairness and so on. And those people would either be appointed by cities or they would be part of guilds. Guilds would decide on standards and so on. So there's this sort of professionalization of the tulip trade, which is taking place in a sort of ad hoc way, which I think is really interesting. I mean, I find the same thing with tulip companies. This is something that no one had ever discovered before I did my research, that there were a number of companies that formed and made agreements about how they were going to

divide up their profits and how they were going to market their goods. And they would have certain partners who were capital partners and there were other partners who did the breeding and the marketing. And it's very interesting to see sort of the capitalism of the Netherlands in microcosm here in the tulip trade. And I found such companies in Amsterdam, in Harlem, and in Enkhuizen the one in Enkhuizen we even have some notarial accounts of what happened

at meetings where they were renegotiating their contracts The abiding image of Dutch taverns in Simon Sharma's book The Embarrassment of Riches is of them just being filled with smoke and obviously as you know Anne the Dutch were big smokers.

I imagine that's not a very inviting place for a fresh, innocent young bulb. So, did they trade like tokens as proxies instead of the actual bulbs? They wouldn't have been trading the bulbs for the reasons that I've mentioned before. They don't trade the bulbs because the bulbs are still in the ground at that point. I think that when you're mainly seeing these types of sales in taverns, this is during the period when tulips are in the ground. And so they would trade about a hypothetical bulb. I mean, I shouldn't say hypothetical because it's a real bulb, but it's not there. And they would go through if they were do if it was an auction, they would go through a number of different types of procedures. Often, often,

they were proxy auctions in which a price had actually been agreed privately, and yet it appeared to be an auction. And then at the end of it, they would go through rituals to indicate that the transaction had been completed. For example, the person who had bought the bulb would have to pay what was called weinhardt wine money which meant that that he was treating other people to uh to a drink and that was often used as proof that the transaction had taken place when later people said well actually no i never agreed and people said no i remember that he paid the weinhardt um they also would um as far as I can see, if it was at an auction, they would trade a

sort of IOU. And I found some of these IOUs in the archives in Alkmaar, which just said, I so-and-so agreed to pay so-and-so this much money for these tulip bulbs. And then they could come back later and present this. But as I said, there are many other ways in which tulips were traded. And so you could get a notarial contract, in which case you could then go back to the notary and say, can you please go back to your notarial book from last October? And you would have a proof that you had gone through this process of agreement. Are there any contemporaneous records of Dutch people at the time thinking, this is a bit stupid, this is all getting a bit much?

People don't doubt this terribly until right at the end, interestingly. There are a few people who say, oh, this is all a bit crazy. I don't, you know, I don't understand what the point of this is, even quite early. That is, why be interested in tulips? There's a school teacher in The Hague in 1624 who keeps a diary in the year after his wife died, David Beck. And he says right away at the beginning, and this is early, this is before what we could think of as a craze. He said, you know, I just don't understand these tulip fools, I think is the term that he used. And you get a few other comments like that. But it's really about, well, why be interested in this? In print, you get an outpouring after February 1637 of songs ridiculing people who were involved in the tulip trade. But there's only one of those pamphlets that I found, which was not printed, which ridicules the tulip trade before the crash. And so although there are a number of people who say, for example, travelers who come through who say, yeah, you know, people will pay the amount of, you know, what you could pay to buy a house or something to buy a tulip. Isn't this crazy thing that they do in the Netherlands? Most Dutch people didn't seem to have that view until it all had gone wrong,

at which point Dutch culture, which at that time was very much a culture based on a sort of song culture in which people are constantly singing together, writing plays, and people belong to play societies, drama societies, and so on. A lot of those societies started writing things, making fun of each other, public ridicule in the form of singing a song in the streets about how stupid they are was something that was relatively common anyway, and it was definitely happening in the winter of 1637. History written by the victors.

Yes. So, the crash began in February of 1637. Do we know what triggered it? This is a good question, what triggered the tulip crash. And people have argued about this. We know basically when it happened, which was the 5th of February, which was a day on which there was a tulip for sale in Harlem and it didn't sell. And I think that that worried people. This was at an auction.

But our only evidence for that is that it's in a pamphlet, which is essentially fictional, but a very famous pamphlet sort of arguing about the trade. And so I'm not sure if this is really the case, but you can trace through the contemporary handwritten documents the fact that over the course of subsequent days, people started to get worried about the tool of trade. I mean, the thing is, this was in Harlem, but there was also a big auction which was going on in Alkmaar on the 7th of February. It was the auction of bulbs belonging to the guardians or being taken care of by the guardians of some orphan children of a tavern keeper who had invested a lot of money in tulip bulbs and they were trying to raise money from the estate. And this was a very well organized auction. They put up posters, they sent out notices that it was happening. And so people from all over the province of Holland went to Alkmaar. And that auction did take place and raised, it would have raised a lot of money, except for the fact that it was in February, and therefore the people didn't have to pay yet because they weren't receiving the bulbs. And so we find, again, what lawsuits

happening later because as they try to get people to pay. And so, I mean, I can see that by Saturday of that week, that would be the 8th, I think, of February, people were already starting to worry. I have a case in Amsterdam where someone buys a tulip on Friday night. So, that would be the 7th, I believe. Sounds like a classic drunken decision. Well, no, I don't think so. Because, you know, it's about when is the, how to, I mean, it's fascinating if you're interested in information and how information travels. Because, you know, this auction was happening, this person thought it was fine, and then

he starts to raise problems, and he says, well, you know, I want to have a guarantor, I want to have, that I'm going to get the tulip, and then the other person on the other side says, I want a guarantor that you're going to get the tulip. And then the person on the other side says, I want to guarantee that you're going to pay the money and stuff. And basically, by Saturday, he's raising all kinds of problems because evidently between Friday night and Saturday, he started to learn that there might be a problem. And already by that time, there had been a meeting in Utrecht of flower growers to try to decide what to do

and to elect delegates to go to a meeting which was going to happen in Amsterdam of flower growers to try to decide what to do about the trade. So there was very quick action among growers to try to deal with this financial issue. And that's where the main action came from, because the government didn't want to get involved. And now that we've painted this picture in broad strokes, perhaps let's talk about how what happened has been misunderstood in the ensuing centuries. And as you very well know, there's like a common tradition or narrative about the tulip mania, which survives even today in movies like Tulip Fever or Wall Street Money Never Sleeps, and has come to us through narrative accounts

like Charles Mackay's extraordinary popular Delusions and the Madness of Crowds, even Charles Kindleberger, Mania's Panics and Crashes, and John Kenneth Galbraith, A Short History of Financial Euphoria. And if I can be so presumptuous and feel free to make amendments to this summary, I think there are three essential

aspects to this narrative one is that almost everybody in society was involved in one way or another the second was that they all went mad such that they weren't capable of seeing the astronomical tulip prices as irrational. And thirdly and finally, a depression resulted when the bubble burst. Is that a fair summary of the three key planks of the tradition? Would you make any amendments to that? I think that's a fair summary, that it was everybody, that it was crazy, and that it ruined the Dutch economy. And none of this is true.

And it was depressing, I have to say. It was depressing to see people like Galbraith, you know, and other famous economists just buy into this without bothering to do any research. Indeed, after some correspondence with economists who are alive now about this matter, who have written about this, I got quite depressed about economists and their attitude towards evidence, Because I found people who are well known now for writing about this essentially making up evidence, I hope I won't get sued for that, that in order to try to push a particular view of

a view of tulip mania. And I mean, you know, as a historian rather than an economist, I believe that I can't put any claims which I can't prove from contemporary materials. And Galbraith was lazy. I don't know what to say about other people who are, you know, I mean, most people don't have the skills to do this type of research. But the fact is that none of this happened in this way. And so, what people did was they went to Charles Mackay. Mackay is responsible for the 20th and 21st century view of this, but Mackay himself got his information from earlier. Sorry. Sorry, just tell people a little bit about Charles Mackay and who he was.

Charles Mackay was a mid-19th century writer who wrote a book called Extraordinary Popular Delusions and the Madness of Crowds. And this was about a variety of bubbles, crashes, and things that Charles Mackay thought were crazy, which included things like the Sesi bubble and the railway mania, which is another sort of financial bubble, which was contemporaneous with Mackay. And he did so in a very colorful way with lots of anecdotes which are made up. And he gets his information from earlier sources. And that's the thing which I found very interesting about Mackay, who is the basis for all of the modern accounts of this. Mackay was basing himself on an earlier book, which was also intended to be entertaining,

by Johann Beckmann, a German writer of a book about inventions, who also wrote, this is in the 1790s, wrote a book that included tulip mania. Beckman was basing his work on a late 17th century writer who was interested really more in flowers, I think, and who said that he, or at least his father, had lived through the tulip mania and he was basing what he was saying on the type of songs, pamphlets ridiculing the trade which came out in the 1630s. And so what I think is interesting about this is that relatively unmediated the propaganda works of the 1630s move into our contemporary discourse through this series of authors, with nobody bothering to go and check that any of it was true. Now, I don't think that it's, I don't think that it's uncoincidental that almost all of these people weren't Dutch and therefore didn't have the ability and weren't professional historians, didn't have the ability to go and see whether

any of this was true. What I thought was interesting was that Dutch historians also didn't really want to work on this. There was one person, well, there was one person, N.W. Posthumus, who was an economic historian, who published some materials about this. And there was someone, E.H. Kralache, who was a professional bulb grower, who was interested in it as well. But that's it. The rest of the Dutch were not interested in writing about this, I think, because they thought that this was a shameful moment in their history, and they didn't want to say anything about that. And so, it was left to me to find out what I could about it. And there's still work that could be done. I didn't

look at every document. I couldn't. And I focused on the main cities. Wow, Anne. So, you have this pretty uninterrupted through line from the original dutch satirical pamphlets which were ridiculing the tulip speculators in the 1630s through to the botanical writer in the 17th century who said his father participated in the tulip mania and who was basing his writings on those same pamphlets. Then later on to Johann Beckmann, the German author. And then he was basically plagiarized by the unrigorous Charles Mackay. And Charles Mackay's work then ends up in the, I guess what we can call for short, the madness of crowds literature, which it has to be said, really laps up the story.

Yes, they do. Why don't we go back to the source and just dwell on the pamphlets for a moment? I know you've kind of spoken about them already, but the most famous of these pamphlets are the Wehrmacht and Gergot pamphlets. I'm not sure if I'm pronouncing those correctly, but it's like... Wehrmacht and Gergot, yeah. There we go. True Mouth and Greedy Goods, what those names mean.

Exactly. It's a typical Renaissance dialogue between somebody who is wise and somebody who is foolish. So Varmont's True Mouth is the wise one, and Harhut's Greedy Goods is the foolish one. And yes, these were the very long pamphlets giving a whole account of the trade. And there are two of them, one that comes out early just after the crash, and then one that comes out a little bit later, where they're both, in both cases, they're saying, well, what am I going to do now? I mean, that's what, I mean, you have Hargud saying, I'm going to do this. I'm going to get involved. This is great. I'm going to make money. And crucially for, you know, for Dutch culture at the time, I, a weaver, am going to become rich and I'm going to ride around

in carriages. This is one of the things that people in the Netherlands were really afraid of was the idea that poor people were going to become rich and then rich people would have to associate with them. And so, the first one really accounts, recounts that process. And then the second one is all about the sort of disappointment. Part of the dialogue is cited in Bob Schiller's book, Irrational Exuberance. And he says, you know, it may be apocryphal, but it's a good example of word of mouth transmission in speculative bubbles. How much historical value should we place in the pamphlets? Do they tell us anything about what happened?

I think they tell us about what the culture was around what happened. I mean, we can't trust them for factual information. And that's one of my problems with the way some of the pamphlets have been used is that, for example, the pamphlet which lists the type of goods that could, that were worth what it could, one might trade for a tulip, for example, which is, you know, starts off with fat, you know, with fat oxen and so on and goes down through a ship and so on. And I mean, eventually you, you know, you get people who say somebody traded fat oxen and so on and goes down through a ship and so on and I mean eventually you you know you get people who say somebody traded fat oxen in a ship for a tulips when in fact it was all about about worth it's not clear

whether you know whether those prices are correct I I worry about I worry about basing any factual analysis on this. But what I do think that they're very good for is to see what kind of cultural concerns there were around Tulip Mania. What did people think mattered? You know, they talk about religion. They talk about trust. They talk about value. They talk about trust. They talk about value. They talk about social mobility.

They talk about how the economy is supposed to work, who's supposed to take part in it, what are those people supposed to do? All of that is really relevant information about values. And so I think that they are useful in those terms to find out about what people were worried about. I think that when Bob Schiller says that about Varmund and Harhut, that it's about oral transmission of information, that that's also, I mean, it's not the source that I would have chosen, but I don't think that he's wrong about the fact that it worked that way because you can easily see from the manuscript materials that I've read that it did happen that way. So, I mean, I wouldn't have cited that, but he's right that that's how tulip mania happened.

A note on the Dutch reaction to tulip mania it's also a myth to think that the dutch were super calvinist right that's like a another sort of misunderstanding of the period and so if it wasn't their calvinism what was sort of the source of like the visceral moral reaction to what happened people who are in charge in the Netherlands were Calvinists. I mean, the government was run by Calvinists, but the Calvinists were actually in a minority in the Netherlands. So, you know, there is a way that Calvinism could, you know, come into this. But I don't think that the moral reaction has to do with making money

because, of course, there were Calvinists and people of other religions, because it was a very mixed society, running around making money like crazy, and everybody thought that that was fine. There were people who worried about what it meant to make money, but they particularly worried about what it meant to make money this way. And I think that there were a couple of things that people were concerned about. One of them was the idea that you make money without working. I mean, it was the idea of speculation. Now, this isn't quite fair, because of course, people were speculating all over the place, and there was a stock market. There was a certain uneasiness with it, and uneasiness with it um and uneasiness with the idea of gambling despite the fact that that people were gambling constantly in dutch society making bets on everything and every

crazy thing you know with which of those two birds is going to take off from the tree first you know that sort of thing and we find many such bets um but there is a debate, there is a religious debate about this, you know, what do what does it say about your attitude to God that you think that things could turn out in a different way, you know, that it's up to God, and so on. I think that the main thing, though, that people were concerned about was who was making the money, not that money was being made. And so it was, this goes back to the question of making money without working. People who were supposed to be working should be working. And the people who are supposed to be working with their hands, that is, craftsmen, and particularly weavers who were not all that involved in the trade, but have an outsized role in the pamphlet literature, maybe because Harlem was a cloth town.

Weavers are seen to be suddenly involved in things that supposedly they didn't understand. But whether they understood them or not, they shouldn't have been involved in them because that's not the kind of thing that you're supposed to do if you're a craftsman. You're supposed to stay in your place. And so the whole idea of people returning to their trade disappointed afterwards is something that I think that the satirical pamphlets crow about because they like the idea that people who think that they're going to ride around in horse-drawn carriages then have to go back to what they call the idea that people who think that they're going to ride around in horse-drawn carriages then have to go back to what they call the wooden horse, which is the horse of the loom, that they ride every day to make their living, that that's how things are supposed to work.

So the big concern, in my view, is the idea that there should be really rapid social mobility and that that's really scary. Society should stay the way that it is with the people who are ruling being the people who have more money and supposedly are more moral. And this might be a place that Calvinism might come in, in that Calvinism suggests that those who are elect are the people who should run everything, and the people who are not elect are, you know, are going to be poor anyway, because they're not blessed by God. But there are plenty of people who are making money on tulips and who are from a higher social class

who aren't Calvinist. So I think that it's a bigger concern about what society should look like and the idea that it shouldn't change too quickly. And this is in a period when society is actually changing relatively quickly, and we are finding people rising in social rank and in wealth quite rapidly, but they're generally doing so over the course of a generation or more. And the worry here was that people were doing it in the space of, you know, a couple of months. And that just did not sit well with the people who were worried about this. So, now we know how the Madness of Crowds version of the Dutch tulip mania narrative survived and became so popular in the modern era. I'd like to kind of take each of those three aspects of the narrative in turn

and just have you kind of give us a comment on it, Anne. So, the first piece of the narrative was that everyone in society was involved and we have Charles Mackay telling us that everyone from chimney sweeps to noblemen was involved in speculating on tulip bulbs. True or not? Not, not true. Yeah, the chimney sweeps and nobles then started appearing everywhere after he says this,

although actually I think that comes up first in Beckman. But no, it was quite a small group of people who were involved. And I saw no mention anywhere of chimney sweeps. There were a few nobles running around here and there, but frankly, there aren't a lot of noblemen in the West of the Netherlands anyway. And so it's not, you know, they're not a big feature, but, you know, there were some people who were in quite high society, but it was mostly upper level craftsmen and middle level, middle level merchants who were involved in certain towns. It was an urban thing and who were often quite closely connected to each other in a variety of ways. I found a network of Mennonites, that is a radical Protestant group still in existence, who were often quite wealthy, who tended to trade with each other. I also found people who were trading together or involved

with each other who were related to each other, who lived near each other, who were involved in similar trades and so on. And so, I mean, in total, I found only about 340, I think, 347, I think is the term, is the number of people who seem to be involved in the trade. Now, that is not a complete number in that I wasn't able to look at every document. I mean, I did spend several years doing archival research, but it was a long process to try to find as much as I could about these people. But I kept a list, and that was about the number that I got. And those people, they weren't the very top of society, they weren't the very bottom of society, they were sort of the middle of society, but they could involve people who were pretty wealthy merchants, and the pretty wealthy merchants were the ones who bought the most

expensive bulbs. It strikes me that even if you were off by an order of magnitude, it still wouldn't have been that many people as a percentage of the Dutch population at the time? No, definitely not. This is, you know, this is a small group. What is interesting is that as time goes on and you get into sort of 1636, there is a wider group that is involved who are buying cheaper tulips. And you get people who are just, yeah, they're lower, they're sort of, you know, lower middle class craftsmen, who are upper working class craftsmen. I don't want to use the word,

I don't like to use the words class about the early modern period. But basically, that sort of of area. And you know, you'll see them in the small claims court saying, you know, he said that he was going to give me this tulip if I gave him a spoon, a silver spoon, which might be quite expensive, you know, but, you know, now, now, you know, now it's not happening. I mean, there were a lot of that, people trading goods for tulips. He was supposed to, I was going to get a suit of clothes for my tulip, and now he won't give me the clothes. And so there is a degree of it spreading out, but not to that extent. And the tulips there were, you know, the cheapest kind, that is plain white, plain yellow. Those are the ones that nobody wanted. They were called rags because they weren't nice enough. Right. So, the second component of the narrative is that everyone went mad and prices were astronomical

and people were willing to trade anything to get their hands on a precious bulb. And there's a famous passage in Mackay's account where he lists all of the items, all of the goods that were exchanged for one single viceroy bulb. And I've got the list here. It includes two lasts of wheat, four lasts of rye, four fat oxen, eight fat swine, twelve fat sheep, two hogsheads of wine, four tonnes of beer, two tonnes of butter, one thousand pounds of cheese, a complete bed, a suit of clothes, and a silver drinking cup, which together amounted to 2,500 florins.

Is this part of the which lists this not as an actual transaction that took place, but to show you how much you might have been able to get for 2,500 guilders. Now, 2,500 guilders was a real lot of money. I mean, people would, a working craftsman would make about a guilder a day. And so, you know, we're talking about, you know, a number of, you know, quite a few years worth of wages for somebody like that. It's not a lot of money. It's not, well, it is still a lot of money, but it's not something that would make or break you if you were a wealthy merchant. And I see sums like this traded all the time. So my main point about that particular list is, A, it wasn't actually traded. Those things weren't traded. And this is how these pampas gets used. All that they were trying to say was, this is what you could buy for that much money and then then we get the idea from mckay that actually all of this stuff gets carted into

a room so that somebody you know has to you know cart away the um you know the butter and the and the oxen and so forth, the price of 2,500 guilders, you could pay that for a bulb. I have seen prices like that and higher. However, there are very, very few sales of that sort of price. And I have only found, I think, 37 people who paid more than about 300 guilders for a bulb total. So there were people who paid a lot, and those were people who, from what I could see, were people who could afford to lose that money. And some of them did.

So that's one part of the story is, did this happen? Yes, it happened, but very, very rarely. But the other part of the story is this question of, was this rational? And my feeling about this as a historian, as an economist and i have to give that caveat um is that it's not rational to pay for something if you think that someone else will buy it off you for the same kind of price. There is no correct amount to pay for a tulip bulb. There's a market price. Tulip bulbs aren't worth an intrinsic amount. And so people at the time said,

well, come on, this is the same, you know, they're being valued above gold, they're being valued above jewels. And my feeling is jewels and gold are also items that don't have an intrinsic value. They only have the value that a purchaser might wish to pay for them. And so they vary according to the market. And so in this case, where there was no reason to think that people would not purchase bulbs for this price, there was nothing irrational about getting involved in this market. What would be irrational would be to continue in the market once it was clear

that that wasn't the case. There were people who did so. And, you know, tulips didn't go away at this point. And in fact, of course, now the Netherlands makes a huge amount of money on them. But I believe that we can't call this irrational, because the trade was successful for a while. There were other trades that also might have looked crazy, such as the East India trade, where in the late 1590s, ships went off around the world, were away for several years, and came back having made a huge amount of money. But, you know, it might have been said to be irrational, especially as the earliest voyage came back with almost none of the crew alive. So merchants in the Netherlands were taking risks all the time. And they had ways of dealing with those kinds of risks. They had insurance, They divided up their transactions sometimes in shares so that each person would have less of a risk and so on. So they understood about taking risks.

But as within any market, there are people who are willing to take risks. And I think that that's the case here and that it isn't irrational, I base that entirely in my idea that there is no, there is no reason to say that a tulip bulb shouldn't be worth that much money, considering that they were extremely rare. If that's what people wanted, fine. And you could compare this with the art market as well. I mean, now people pay prices for paintings, which in the 17th century weren't worth very much money at all. Now people pay astronomical prices for, you know, Dutch masters. It has to do with what the market will bear. And I think that's the same with tulips. Now, the one thing that some of the pamphlets do address is the fact that the tulips are not durable goods, that they will eventually die.

And that in itself, I do think perhaps is a question that one could raise about whether this was sensible. But the thing is that if you were only going to hold on to it for a while, or if you wanted it for aesthetic reasons, which I think is true of a lot of people, though not everybody, or you wanted it to show off your knowledge and your taste and your, you know, trendiness, which I think, I mean, it was definitely trendy for among a certain type of person to have these sorts of things. Well, why not? They weren't durable goods, but you could also increase the supply, right? Through the seeds or the bulbs. It wasn't easy to increase the supply because of the way in which tulips were bred.

If you wanted a tulip which was going to break nicely, that is, end up with nice stripes or speckles, you had to keep it in the ground for about 10 years. And so it wasn't so easy to do so. And it was a long process. You could also buy a bulb which had offsets, which had little other bulbs growing on them. And that's why those were the most expensive bulbs, because that was a quick way to increase. It's clear that some people thought in these terms, both because of the fact that people bought bulbs with offsets for higher prices.

There was also a guy in Harlem who bored holes in the tulips that he sold so that they wouldn't grow. And there was a whole kerfuffle about this in I think it was 1635, about the fact that he was trying to limit the supply. He sold these bulbs on and then prevented them from flourishing. And there was a sort of inquiry into this,

local inquiry among tulip professionals. But it really wasn't that easy to increase the supply. Now, I think that the crash probably happened because people understood that the supply was starting to increase and that people just started to worry about it but i can't prove that it's um it's the only explanation that i can have for that i can find for why the crash might have happened was that people just felt that this wasn't going to be sustainable in the long term.

So you largely agree with Peter Garber, who makes the argument in his book Famous First Bubbles that tulip prices mostly moved in line with fundamentals and there wasn't really that much speculation? I don't know what to call speculation. I mean, the prices were quite a bit higher than you would pay for almost anything. I mean, you know, people saying, well, you could buy a house for the price of a tulip bulb is true because houses some houses weren't very expensive but but I think that I mean I do I think that there was a moment when to the prices got out of hand but it was a very sure I mean maybe that's not the best term to use, but there was a period when tulip prices rocketed, but that went on for about six weeks. And so, yes, I think that there is a certain amount of speculation in that people, if you want to call speculation, assuming that the prices were

going to continue to rise. The third and final aspect of this story is that there was a depression and let me quote a couple of the famous accounts of this depression. So, Burton Malkiel reminds us in his very famous book, A Random Walk Down Wall Street, that, quote, the final chapter of this bizarre story is that the shock generated by the boom and collapse was followed by a prolonged depression in Holland. No one was spared, end quote. And then we have John Kenneth Galbraith in A Short History of Financial Euphoria, quote, the collapse of the tulip prices and the resulting impoverishment had a chilling effect on Dutch economic life

in the years that followed. There ensued, in modern terminology, an appreciable depression, end quote. Is this part of the narrative true or not? It's not true. And this is another case where Malkiel and Galbraith really fall in my estimation because they just didn't bother to check. There is no real depression at this time. downturn in trade dating from the late 1620s for a little bit, which has nothing to do with tulips at all, but has to do with the war that the Dutch were fighting with the Spanish.

But if you look at financial figures to do with all sorts of different trades, there is no real effect on the economy. And this is because not very many people were involved in the trade, not very many people were spending very much on tulips of the people that were involved, and the people who were spending a lot, some of those people didn't lose anything. In fact, most of them didn't because of the way the trade worked. That is, if you promise to spend money on something in, say, December that you're not going to receive until May or June you're not going to pay that money until May or June and so when May or June comes you say no I'm not going to pay and so the only person who loses money is the person who is holding the bulb at that time

that is the seller isn't going to lose anything is the person who's going to lose nobody else is going to lose any money so most of the people were involved going to lose anything, is the person who's going to lose. Nobody else is going to lose any money. So most of the people who were involved didn't lose anything anyway. And the people who were paying, who were involved in the biggest transactions were people who generally who had a lot of money anyway. And so I couldn't find anybody who went bankrupt bankrupt because of Tulip Mania. And so, I mean, I didn't see the film Tulip Fever because it wasn't released in Britain where I am, but I read the book and the book included... That's Deborah Mogich's book. That's right.

I mean, she has the, you know, she has people, you know people jumping in canals and drowning themselves, and there was nothing like that. There were people who weren't very happy and who repeatedly had notaries come to people's houses and say, you owe me money, what are you going to do about it? But there wasn't a lot that people could do because people just kept saying, Hey, you know, everybody else has refused to pay. So, so am I, they had to make an answer. And so they, that was the answer they said that they generally gave was I will do as another has done. And that's what I think caused the big problem was that people said, well, what are we supposed

to do? And everybody says, well, I'm not going to pay for the things that I've bought. That's the crisis, in my view, is that people started to see that it might be seen as acceptable not to pay up when you made a promise. That's a problem in a country which runs on credit. In terms of actual depression, even those people that lost that money, you find them speculating on other things in the same period. So, you know, when I went looking in bankruptcy records, which are a bit patchy, I found, for example, looking at sales of houses of bankrupts in Harlem, I found the names of some big tulip traders, but they were there buying the houses of other bankrupts. They weren't there because they were bankrupt, because these were wealthy men who were involved in all kinds of speculation and transactions. So no, there was not a depression. And if there was any kind of downturn at all in the economy, it was not due to tulip mania. So when we cut away the myth or

the penumbra that surrounds what actually happened, were the speculators, these few hundreds of merchants in the Netherlands during the early 17th century, were they irrational? I would say that they weren't irrational because they found a new product, like many other new products which were coming into the Netherlands at the time from foreign places. They found a new product that was exciting, which appealed to people's aesthetic sense, which people wanted to buy as a luxury product to show off their education and their taste. And they decided that they wanted to be part of that group or that they wanted to sell to those who were in that group. And they had worked for many other products, for example, East India porcelains, which were starting to come into the country, silk from Japan.

There were all kinds of things which also fall into the similar type of category. And there was no reason not to think that this wasn't going to work. There were other flowers that people also were excited about. Anemones, for example, were another exciting flower at the time and all sorts of other exotic flowers, some of which we don't see that much anymore, like crown imperials and so on. And later on, there are other flowers that people get excited about. Hyacinths in the 18th century, gladioli at the beginning of the 20th century. And orchids, of course, about which lots has been so i just i just don't think this is irrational i think that it was a sensible decision at the time um i think that there is a widening of the trade um and that there are some people who thought they could make quick money on it um and they were disappointed

but there was no reason for them not to think that either that is i don't think that this was that the crash was very predictable, especially as something like this had never happened before. So I wouldn't consider it to be irrational. But this is from the point of view of a historian trying to think about a lot of different factors as well as economics, I could easily see why somebody would think that there was no reason for the prices of these not to be high because the market was there. So, as I've said, if the market will bear the price, the price is not an irrational price. Anne Goldgar, I appreciate you. I admire your work. Thank you so much for coming on the show. Thank you so much, Joe.

Thank you so much for listening. I hope you enjoyed that conversation as much as I did. For show notes, including links to everything we discussed, you will find those on my modestly titled website, josephnoelwalker.com. That's my full name, J-O-S-E-P-H-N-O-E-L-W-A-L-K-E-R.com. Please do subscribe to or follow the podcast, depending on which app you use, to ensure that you never miss updates when we release new episodes. The audio engineer for the Jolly Swagman podcast is Lawrence Moorfield. Our very thirsty video editor is Alf Eddy. I'm Joe Walker. Until next time, thank you for listening. Ciao. I lose it all when I'm with you.