Term Paper: Tulip Mania, The World’s First Bubble

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The very first in depth study on the Tulip Mania was Charles Mackay’s study published in 1841, by the name Extraordinary Popular Delusions and the Madness of Crowds. In his study he cites the dangers of crowds, herds, or mob like thinking that leads to such crises. Since its publishing, many scholars, mainly economists have come along to criticize his study saying that his reasoning and rationale is over the top and too extreme. One excerpt from the study states, that “men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly and one by one” (Mackay). This statement really hits close to home and describes the actions of men during the tulip crisis perfectly, as investors only regained their sense of reality once the prices of tulips hit rock bottom. There are many factors that came together and attributed to what amounted to be Tulip Mania, which included policymakers in the Dutch parliament passing legislation that contributed and encouraged the rise of the bubble, the environmental factor that the Netherlands just happened to be the optimum local for growing tulips, and also importantly sociological factors such as the bubonic plague that hit the Dutch hard. Tulips slowly became a sign of immense wealth in the Netherlands and in turn local farmers took notice and began to grow a large amount of tulips. Going back to the environmental factors, the ideal Dutch climate resulted in a mass production of tulips that no other area of Europe could match. Map Showing Tulip Growing regions throughout Europe. The Tulip Mania crisis was a result of large speculation by investors and farmers. “At the peak of Tulip Mania these bulbs were valued at more than ten times... ... middle of paper ... ...262 “Investor Manias through the Centuries.” http://search.proquest.com/docview/223192012?accountid=8262 “Financial Market Bubbles” http://www.jstor.org/stable/40056811 Jones, Dan. “Bursting Bubbles.” History Today 59.8 (2009): 3-4. Historical Abstracts. Kindleberger, Charles P. Manias, Panics, and Crashes: A History of Financial Crises. London: Macmillan, 1978. Garber, Peter M. “Famous First Bubbles.” Journal of Economic Perspectives 4.2 (1990): 35-50. Historical Abstracts. Thompson, E. A. (2007). “The tulipmania: Fact or artifact?” Public Choice, 130(1-2), 99-114. Mackay, C. (2004) [1841] Extraordinary popular delusions and the madness of crowds. Garber, P. M. (1989). ‘Tulipmania’. Journal of Political Economy, 535-560. http://www.economist.com/blogs/freeexchange/2013/10/economic-history http://www.vanityfair.com/online/daily/2013/04/logic-problems-bitcoin-bubble

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