------------ EH.NET BOOK REVIEW --------------
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.

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