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The tulipmania: Fact or artifact?

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  • Earl Thompson

Abstract

The famous tulipmania, which saw the reported prices of several breeds of tulip bulbs rise to above the value of a furnished luxury house in 17th century Amsterdam, was an artifact created by an implicit conversion of ordinary futures contracts into option contracts in an imperfectly successful attempt by Dutch futures buyers and public officials to bail themselves out of previously incurred speculative losses in the impressively price-efficient, fundamentally driven, market for Dutch tulip contracts. There was thus nothing maniacal about prices in this period. Despite outward appearances, the tulipmania was not a bubble because bubbles require the existence of mutually-agreed-upon prices that exceed fundamental values. The “tulipmania” was simply a period during which the prices in futures contracts had been legally, albeit temporarily, converted into options exercise prices. Copyright Springer Science + Business Media B.V. 2007

Suggested Citation

  • Earl Thompson, 2007. "The tulipmania: Fact or artifact?," Public Choice, Springer, vol. 130(1), pages 99-114, January.
    • Handle: RePEc:kap:pubcho:v:130:y:2007:i:1:p:99-114
    DOI: 10.1007/s11127-006-9074-4
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    Cited by:

    1. Quinn, William & Turner, John D., 2020. "Bubbles in history," QUCEH Working Paper Series 2020-07, Queen's University Belfast, Queen's University Centre for Economic History.
    2. White, Reilly & Marinakis, Yorgos & Islam, Nazrul & Walsh, Steven, 2020. "Is Bitcoin a currency, a technology-based product, or something else?," Technological Forecasting and Social Change, Elsevier, vol. 151(C).
    3. Turner, John D., 2014. "Financial history and financial economics," QUCEH Working Paper Series 14-03, Queen's University Belfast, Queen's University Centre for Economic History.
    4. Udo Milkau, 2017. "Risk Culture during the Last 2000 Years—From an Aleatory Society to the Illusion of Risk Control," IJFS, MDPI, vol. 5(4), pages 1-20, December.
    5. Pengfei Wang & Yi Wen, 2012. "Speculative Bubbles and Financial Crises," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 184-221, July.
    6. Itzhak Venezia, 2018. "Lecture Notes in Behavioral Finance," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 10751, January.
    7. Campbell, Gareth & Turner, John, 2010. "‘The Greatest Bubble in History’: Stock Prices during the British Railway Mania," MPRA Paper 21820, University Library of Munich, Germany.
    8. Algieri, Bernardina, 2018. "A Journey Through the History of Commodity Derivatives Markets and the Political Economy of (De)Regulation," Discussion Papers 281139, University of Bonn, Center for Development Research (ZEF).
    9. Xavier Bredart, 2014. "The Crisis: The Relentless Resulting of an Explosive Cycle," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 5(3), pages 68-72, July.
    10. Awaya, Yu & Iwasaki, Kohei & Watanabe, Makoto, 2022. "Rational bubbles and middlemen," Theoretical Economics, Econometric Society, vol. 17(4), November.
    11. Ali Çelik & Çağrı Ulu, 2023. "Testing the Price Bubbles in Cryptocurrencies using Sequential Augmented Dickey-Fuller (SADF) Test Procedures: A Comparison for Before and After COVID-19," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 70(1), pages 1-15, March.

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