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The title is a little misleading. The article itself acknowledges that there was a tulip fever: > That’s not to say that everything about the story is wrong; m

The title is a little misleading. The article itself acknowledges that there was a tulip fever: > That’s not to say that everything about the story is wrong; merchants really did engage in a frantic tulip trade, and they paid incredibly high prices for some bulbs. And when a number of buyers announced they couldn’t pay the high price previously agreed upon, the market did fall apart and cause a small crisis—but only because it undermined social expectations. But it implies that it's not all that notable because it didn't collapse the entire economy: > But the trade didn’t affect all levels of society, and it didn’t cause the collapse of industry in Amsterdam and elsewhere. Personally, I don't think I'd ever made the assumption that it had. Likewise, if Bitcoin were to implode, it would be similar — some people would suffer, but it wouldn't be all that widespread of an effect. Tulipmania still makes a great historical anecdote on speculation, and I for one, will keep using it as one.

pfarnsworth 9y ago
I was going to make the same comment. I never heard that the Dutch economy collapsed from the tulip trade. But everything else was confirmed. And just like when the bitcoin bubble bursts, I don't think there will be a collapse in the economy either, but it will definitely be a phenomenon that will be talked about decades later.
dogruck 9y ago
I'd say the title is absolutely misleading.
- abstrct 9y ago
  Sounds like a case of... titlemania... Edit: Sorry, you're all right. There wasn't any titlemania after all.
conistonwater 9y ago
It's very modern of them to assume that a speculative bubble would cause collapse of industry and that it's remarkable that it didn't. The whole relationship between "some people default on loans" and "some other people lose jobs" is a relatively modern type of financial crisis, starting in late 19th century. In a way, it's a curious introduction to macroeconomics, the apparent puzzle that when one person is unable to repay a debt, why does another person somewhere else lose their job? I think they missed an opportunity there to write a little bit more about it, it would explain why people should still care about bubbles.
cloverich 9y ago
You may not have made that assumption, but its a _very_ common characterization of what happens in free market based economies. Or more directly, tulipmania is frequently equated with business cycles. I never saw it either, but I've definitely seen it presented as a valid argument many times.
- Eliezer 9y ago
  Are business cycles in the modern sense (unemployment that lasts for longer than six months) known to happen in the presence of free banking and absent a central bank? Actual question. It matters because we know how this happens when a central bank controls the currency supply and allows NGDP to drop. It's not obvious to me that this happens with free banking.
  - nerdponx 9y ago
    Isn't this exactly what happened in the US in the 1800s? A panic and a crash every few years.
    - lend000 9y ago
      Seems like it's completely unavoidable for there to be cycles; central banks and regulations intended to smooth the economy just seem to expand the cycles (longer booms and longer busts) and concentrate malinvestment in different areas (real estate debt in the last crash, for example).
      - eesmith 9y ago
        ‘Fragile by Design: The Political Origins of Banking Crises and Scarce Credit’, by Charles Calomiris and Stephen Haber. Quoting http://press.princeton.edu/titles/10177.html http://press.princeton.edu/titles/10177.html : > Why are banking systems unstable in so many countries—but not in others? The United States has had twelve systemic banking crises since 1840, while Canada has had none. The banking systems of Mexico and Brazil have not only been crisis prone but have provided miniscule amounts of credit to business enterprises and households. > Analyzing the political and banking history of the United Kingdom, the United States, Canada, Mexico, and Brazil through several centuries, Fragile by Design demonstrates that chronic banking crises and scarce credit are not accidents. Calomiris and Haber combine political history and economics to examine how coalitions of politicians, bankers, and other interest groups form, why they endure, and how they generate policies that determine who gets to be a banker, who has access to credit, and who pays for bank bailouts and rescues. Paper by the authors available from https://www.frbatlanta.org/-/media/documents/news/conferences/2013/fmc/13fmccalomiris.pdf https://www.frbatlanta.org/-/media/documents/news/conference... . > Canadian banks historically had balance sheets like other banks, and participated in complex global interbank networks since the early 19th century. Yet Canadian banks, throughout their history, avoided systemic banking crises – with the exception of two short-lived suspensions of convertibility in 1837 and 1839 in response to crises originating in the United States. Moreover, prudential regulation was absent for much of Canada’s history, as was a central bank (until 1935). According to the structural theory of crises, the exposure of Canadian banks to liquidity risk should have been higher than in many other countries, given that the Bank of Canada did not come into existence until 1935. According to the externalities theory and the myopia theory, the absence of activist prudential regulation in Canada during most of its history should have been associated with a higher frequency of banking crises, but it was not. Note that you write "central banks and regulations intended to smooth the economy" but at that last quote points out, "prudential regulation was absent for much of Canada’s history", so something is incomplete in your understanding.
dang 9y ago
OK, we've changed the article's headline to a phrase used by the book's author.
mirimir 9y ago
Sure, but this is the most interesting part, I think: > So if tulipmania wasn’t actually a calamity, why was it made out to be one? We have tetchy Christian moralists to blame for that. With great wealth comes great social anxiety, or as historian Simon Schama writes in The Embarrassment of Riches: An Interpretation of Dutch Culture in the Golden Age, “The prodigious quality of their success went to their heads, but it also made them a bit queasy.” All the outlandish stories of economic ruin, of an innocent sailor thrown in prison for eating a tulip bulb, of chimney sweeps wading into the market in hopes of striking it rich—those come from propaganda pamphlets published by Dutch Calvinists worried that the tulip-propelled consumerism boom would lead to societal decay. Their insistence that such great wealth was ungodly has even stayed with us to this day. > “Some of the stuff hasn’t lasted, like the idea that God punishes people who are overreaching by causing them to have the plague. That’s one of the things people said in the 1630s,” Goldgar says. “But the idea that you get punished if you overreach? You still hear that. It’s all, ‘pride goes before the fall.’” There's some of that in cryptocurrency criticism.
KGIII 9y ago
The title is now changed but it reminds me of a tangentially related pet peeve. I really dislike titles like this. Why do they presume to know what I think? An example from yesterday was that consciousness goes deeper than I thought. On reading the article, it did no such thing. Again, why would they presume to know what I think? I'm not sure why it rubs me wrong. It certainly biases my perception of the article before I've even read it. I even know that it is prejudicing my reading but I can't seem to get over it. To me, they seem like click-bait. No, the answer may not surprise me and no, the author actually had no idea what I was thinking. It really does bias me against the article. It's just a small thing but I can see my own biases when I see headlines that include similar statements. No big deal, just a pet peeve.
- jerrre 9y ago
  Never really thought about this, but a sharp point. Easy to prove the title wrong by reading an article twice. Second time it can't be true
  - KGIII 9y ago
    I think it may bother me because I see it as insulting our/my intelligence. 'We looked at X and you won't believe what we found!' Why yes, yes I will believe what you found, provided you give clear evidence, explain your methodology, and provide credible citations where needed. I was worried it was only me who felt like this, as I'd not seen anyone else mention it. It really does bias my reading of the article afterwards. I should probably figure out a way to work past that bias, but I guess I should be grateful that I recognize it in myself. Again, nothing major - it just irks me a bit. I'm not going to rage-quit or anything.
    - ballenf 9y ago
      Slight nuance, but I'd say it's assuming the existence of a collective intelligence and homogeneity in the population. Its a slight backhand insult to prod readership for anyone who doesn't already know the subject. It pushes that button of the fear of being left out of a trend. It's clickbait in another form. Playing psychological games with readers. It's disrespecting its readers for making an assumption that readers are too shallow to show interest in substance. So, agree, insulting readers' intelligence.
codeulike 9y ago
Tulipmania still makes a great historical anecdote on speculation, and I for one, will keep using it as one. Be careful, seems to me the Tulipmaniamania bubble might be about to burst.

pfarnsworth 9y ago

I was going to make the same comment. I never heard that the Dutch economy collapsed from the tulip trade. But everything else was confirmed. And just like when the bitcoin bubble bursts, I don't think there will be a collapse in the economy either, but it will definitely be a phenomenon that will be talked about decades later.

dogruck 9y ago

I'd say the title is absolutely misleading.

abstrct 9y ago
Sounds like a case of... titlemania... Edit: Sorry, you're all right. There wasn't any titlemania after all.

conistonwater 9y ago

It's very modern of them to assume that a speculative bubble would cause collapse of industry and that it's remarkable that it didn't. The whole relationship between "some people default on loans" and "some other people lose jobs" is a relatively modern type of financial crisis, starting in late 19th century. In a way, it's a curious introduction to macroeconomics, the apparent puzzle that when one person is unable to repay a debt, why does another person somewhere else lose their job? I think they missed an opportunity there to write a little bit more about it, it would explain why people should still care about bubbles.

cloverich 9y ago

You may not have made that assumption, but its a _very_ common characterization of what happens in free market based economies. Or more directly, tulipmania is frequently equated with business cycles. I never saw it either, but I've definitely seen it presented as a valid argument many times.

Eliezer 9y ago
Are business cycles in the modern sense (unemployment that lasts for longer than six months) known to happen in the presence of free banking and absent a central bank? Actual question. It matters because we know how this happens when a central bank controls the currency supply and allows NGDP to drop. It's not obvious to me that this happens with free banking.
- nerdponx 9y ago
  Isn't this exactly what happened in the US in the 1800s? A panic and a crash every few years.
  - lend000 9y ago
    Seems like it's completely unavoidable for there to be cycles; central banks and regulations intended to smooth the economy just seem to expand the cycles (longer booms and longer busts) and concentrate malinvestment in different areas (real estate debt in the last crash, for example).
    - eesmith 9y ago
      ‘Fragile by Design: The Political Origins of Banking Crises and Scarce Credit’, by Charles Calomiris and Stephen Haber. Quoting http://press.princeton.edu/titles/10177.html http://press.princeton.edu/titles/10177.html : > Why are banking systems unstable in so many countries—but not in others? The United States has had twelve systemic banking crises since 1840, while Canada has had none. The banking systems of Mexico and Brazil have not only been crisis prone but have provided miniscule amounts of credit to business enterprises and households. > Analyzing the political and banking history of the United Kingdom, the United States, Canada, Mexico, and Brazil through several centuries, Fragile by Design demonstrates that chronic banking crises and scarce credit are not accidents. Calomiris and Haber combine political history and economics to examine how coalitions of politicians, bankers, and other interest groups form, why they endure, and how they generate policies that determine who gets to be a banker, who has access to credit, and who pays for bank bailouts and rescues. Paper by the authors available from https://www.frbatlanta.org/-/media/documents/news/conferences/2013/fmc/13fmccalomiris.pdf https://www.frbatlanta.org/-/media/documents/news/conference... . > Canadian banks historically had balance sheets like other banks, and participated in complex global interbank networks since the early 19th century. Yet Canadian banks, throughout their history, avoided systemic banking crises – with the exception of two short-lived suspensions of convertibility in 1837 and 1839 in response to crises originating in the United States. Moreover, prudential regulation was absent for much of Canada’s history, as was a central bank (until 1935). According to the structural theory of crises, the exposure of Canadian banks to liquidity risk should have been higher than in many other countries, given that the Bank of Canada did not come into existence until 1935. According to the externalities theory and the myopia theory, the absence of activist prudential regulation in Canada during most of its history should have been associated with a higher frequency of banking crises, but it was not. Note that you write "central banks and regulations intended to smooth the economy" but at that last quote points out, "prudential regulation was absent for much of Canada’s history", so something is incomplete in your understanding.

dang 9y ago

OK, we've changed the article's headline to a phrase used by the book's author.

mirimir 9y ago

Sure, but this is the most interesting part, I think: > So if tulipmania wasn’t actually a calamity, why was it made out to be one? We have tetchy Christian moralists to blame for that. With great wealth comes great social anxiety, or as historian Simon Schama writes in The Embarrassment of Riches: An Interpretation of Dutch Culture in the Golden Age, “The prodigious quality of their success went to their heads, but it also made them a bit queasy.” All the outlandish stories of economic ruin, of an innocent sailor thrown in prison for eating a tulip bulb, of chimney sweeps wading into the market in hopes of striking it rich—those come from propaganda pamphlets published by Dutch Calvinists worried that the tulip-propelled consumerism boom would lead to societal decay. Their insistence that such great wealth was ungodly has even stayed with us to this day. > “Some of the stuff hasn’t lasted, like the idea that God punishes people who are overreaching by causing them to have the plague. That’s one of the things people said in the 1630s,” Goldgar says. “But the idea that you get punished if you overreach? You still hear that. It’s all, ‘pride goes before the fall.’” There's some of that in cryptocurrency criticism.

KGIII 9y ago

The title is now changed but it reminds me of a tangentially related pet peeve. I really dislike titles like this. Why do they presume to know what I think? An example from yesterday was that consciousness goes deeper than I thought. On reading the article, it did no such thing. Again, why would they presume to know what I think? I'm not sure why it rubs me wrong. It certainly biases my perception of the article before I've even read it. I even know that it is prejudicing my reading but I can't seem to get over it. To me, they seem like click-bait. No, the answer may not surprise me and no, the author actually had no idea what I was thinking. It really does bias me against the article. It's just a small thing but I can see my own biases when I see headlines that include similar statements. No big deal, just a pet peeve.

jerrre 9y ago
Never really thought about this, but a sharp point. Easy to prove the title wrong by reading an article twice. Second time it can't be true
- KGIII 9y ago
  I think it may bother me because I see it as insulting our/my intelligence. 'We looked at X and you won't believe what we found!' Why yes, yes I will believe what you found, provided you give clear evidence, explain your methodology, and provide credible citations where needed. I was worried it was only me who felt like this, as I'd not seen anyone else mention it. It really does bias my reading of the article afterwards. I should probably figure out a way to work past that bias, but I guess I should be grateful that I recognize it in myself. Again, nothing major - it just irks me a bit. I'm not going to rage-quit or anything.
  - ballenf 9y ago
    Slight nuance, but I'd say it's assuming the existence of a collective intelligence and homogeneity in the population. Its a slight backhand insult to prod readership for anyone who doesn't already know the subject. It pushes that button of the fear of being left out of a trend. It's clickbait in another form. Playing psychological games with readers. It's disrespecting its readers for making an assumption that readers are too shallow to show interest in substance. So, agree, insulting readers' intelligence.

codeulike 9y ago

Tulipmania still makes a great historical anecdote on speculation, and I for one, will keep using it as one. Be careful, seems to me the Tulipmaniamania bubble might be about to burst.