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But it wasn’t irrational to pay a high price for something that was generally considered valuable, and for which the next person might pay even more. What? Tha

But it wasn’t irrational to pay a high price for something that was generally considered valuable, and for which the next person might pay even more. What? That's no way to 'disprove' a bubble. Of course the people buying stuff thought it was valuable, or that there would be a greater fool to sell it to. That doesn't mean they were right. Although it’s true that the most expensive tulips of all cost around 5,000 guilders (the price of a well-appointed house)... How is that not irrational? Come on. I was able to identify only 37 people who spent more than 300 guilders on bulbs Is this evidence of absence, or absence of evidence? Anyone who had both bought and sold a tulip on paper since the summer of 1636 had lost nothing. Well, yes. It's the bagholders that lose out in a bubble. If you manage to buy and sell something that's overpriced, then you'll be ok. But someone will be left holding it. In any case, the south sea bubble is a far far better fit for bitcoin and crypto coin mania. They even had comparable ICO sales!

kylell 9y ago
I guess if there is a 50% or more chance that someone will pay more and you would make money then it makes sense, you can't win if you don't risk, those who stay on the side find comfort in calling those who risk, lucky when they win and stupid when they lose.
jypepin 9y ago
most of the interesting point is that it seems like tulip were more part of the realm of art then commodities. People were buying tulips because it was a sign of wealth and taste and a beautiful rare object to display, just like art. People were speculating on those, just like art. But when people do so with Art and pay millions, nobody bats an eye. Bitcoin (and other commodities) might have another underlying reason for why people give them value and decide to speculate on them (just like, say, Wall Street speculating on cattle futures). So yeah, maybe some Tulips were sold the price of houses - but it sounds normal when someone spends millions on a painting. I'm defending any point, just saying I think it's interesting to read this, I never heard before that people were mostly buying tulips because of their symbols, not just for pure speculation.
- ozim 9y ago
  Nope, they were trading tulip bulbs. You have to store those bulbs in good condition so the flower could bloom. Bulbs are not something you can show off with. Once it blooms it is over you cannot show it off like art. So paying price of a house for something you cannot really show off, will spoil quickly, and you could probably sell to next fool for higher price is pure greedy speculation.
  - achamayou 9y ago
    Once it’s done blooming, you can extract the bulb and store it until next year, it works quite well. In dry enough soil, you might even get away with leaving it in the ground.
  - pvaldes 9y ago
    Once is blooming your expensive Picasso is now two or four expensive Picassos, and in the next year you'll have maybe 20 picasso or so. And as everybody wants to have it in their houses you could easily sold 10 and keep the other. In the tulipmania some people lost money. The few buyers that knew their stuff, with the expertise to know how to multiply, take good care of them and keep it clean of diseases just get rich. If the unique and rare tulip weren't diseased their owner would became extremely rich and famous. Buying it was the logic choice. The same clone of turkish bulb has been sold each year for entire generations of the same european families. Thousands of years after, is still sought for buyers.
- mannykannot 9y ago
  You are putting the emphasis on 'speculative' rather then 'bubble'. All speculative markets go through bubble-like phases, and your success in speculating in a market depends quite a bit on your ability to understand what is driving prices in that particular market during the times you are active in them, and in understanding when, and to what extent, they are bubbling. If one thinks tulips are just like art is just like bitcoin is just like cattle futures, you may not be well-enough informed to speculate successfully in any of those markets.
  - 9y ago
bufferoverflow 9y ago
> How is that not irrational? Come on. It's not irrational in the most basic economic sense - supply and demand determines the price. Why is gold so expensive? Around 90% of it is being hoarded, not used industrially. People think it's valuable, the supply is limited, therefore it is valuable. Same with cryptocurrencies. Actually, particular cryptocurrency supply is truly limited, unlike gold, which is extremely abundant in our universe. The only weird thing about the tulipmania is that tulips can be (relatively) easily grown.
- joosters 9y ago
  Actually, particular cryptocurrency supply is truly limited, unlike gold, which is extremely abundant in our universe. Depends what you mean by a 'particular' cryptocurrency. There's certainly been no sign of a limit on bitcoin, what with all its forks. And there's no end of alternative copycat coins filling the list at coinmarketcap.com. You have to take a leap of faith to trust that miners won't change the system once all the 'limited' 21 million original bitcoins have been produced...
  - tlrobinson 9y ago
    Ultimately miners aren’t in charge. If miners try to change the rules, but the majority of users ignore them, the miners’ fork will be close to worthless.
    - pbhjpbhj 9y ago
      Doubt you need miners in order to process transactions, how would you do it without any miners?
      - Libturd 9y ago
        are you serious? lulz
      - deleted 9y ago
        [deleted]
barry-cotter 9y ago
>>Although it’s true that the most expensive tulips of all cost around 5,000 guilders (the price of a well-appointed house)... >How is that not irrational? Come on. Rolex, Vertu, Louis Vuitton, Patek Philippe, Coach, Armani. All of these are luxury brands. Their products range from very expensive to more than the average person will earn in a lifetime, never mind the price of a well appointed house, all for goods which are at best five times as mass market equivalents that cost less than 1% of their price. And they're worth it to t least some of their buyers either because they believe the difference in quality is worth it or because they understand signalling. https://en.wikipedia.org/wiki/Signalling_%28economics%29 https://en.wikipedia.org/wiki/Signalling_%28economics%29 You may have heard that Elon Musk recently launched a sportcar into space. The Netherlands had rich people who could afford to spend money on things they enjoyed too. There's no accounting for taste. https://en.wikipedia.org/wiki/De_gustibus_non_est_disputandum https://en.wikipedia.org/wiki/De_gustibus_non_est_disputandu...
- fnovd 9y ago
  People typically don't buy luxury bags with the hope of selling them for a profit, though.
  - kgwgk 9y ago
    Some people do: https://www.theguardian.com/culture/shortcuts/2016/jan/17/the-birkin-bag-a-better-investment-than-stocks-and-shares https://www.theguardian.com/culture/shortcuts/2016/jan/17/th...
infodroid 9y ago
What is often overlooked and misunderstood is that the bulbs were not only valued for their beauty, but more importantly for their use as commercial breeding stock. Since it was not possible to reproduce the best bulbs through seed propagation, the already rare buds themselves were the only source of producing future varieties exhibiting the same beautiful patterns. This goes a great way to explaining the high prices paid, and debunking the myth of irrationality. "The tulip market involved only bulbs affected by a mosaic virus which had the effect of creating beautiful, feathered patterns in the flowers. Only diseased bulbs were valued by traders, because a particular pattern could not be reproduced through seed propagation. Only through budding of the mother bulb would a pattern breed true." - Garber, Famous First Bubbles https://www.aeaweb.org/articles?id=10.1257/jep.4.2.35 https://www.aeaweb.org/articles?id=10.1257/jep.4.2.35
- jon_richards 9y ago
  Just because something is limited in supply and capable of reproducing doesn't mean it inherently has value in the context of the greater economy. I don't think this "debunks" the irrationality of tulips. When the price crashed, they weren't left with a tulip they could continue to breed and make a living with, they were left with a worthless tulip. I'll admit irrationality is hard to define. One could argue the entire art in industry is irrational, but given how low it's been around, it's safe to assume it ties into some fundamental irrationality in us that in turn makes it rational.
  - darawk 9y ago
    Yes, but the discounted present value of that tulip's reproductive capacity into the future is much more justifiable to value so highly. It turned out not to be a good investment, but that doesn't make it irrational. Had a moderately good tulip market persisted, it may have justified paying such a high price for uniquely high quality bulbs, because you could turn them into a productive asset by breeding them.
matwood 9y ago
> How is that not irrational? Come on. This kind of statement always interests me in an socio-economic sense. What is rational? What it often comes down to is a personal "my choice is the rational one, and everyone else is irrational". Take an iPhone for example. There are much cheaper phones out there, so is everyone buying an iPhone irrational? And then it only follows, is everyone who buys Apple stock irrational? Additionally, bubble is a term I find thrown around too easily. It seems any time an asset price is high, people immediately think bubble. A high asset price is not enough. The price must be far beyond some underlying value. The rub is determining value. Is BTC in a bubble? The price is high, and has been very volatile, but what is the value? With my laymen knowledge of BTC, I think the value is certainly > 0$, but is it < 10k? I don't know. Thinking about this reminds me of the housing bubble. In Vegas house prices made no sense because there is literally land as far as you can see in every direction. Where I live now, there were also clear disconnects from value and price (crappy apartments turned into crappy condos), but not every piece of expensive property was selling way beyond its value. There are properties along the water or on the beach that really are in short supply. Those barely moved down when the housing bubble popped. Defining 'value' is also a fun conversation, but I've rambled on too long :)
contravariant 9y ago
The author seems to go through great lengths to call a phenomenon where people bought something to sell it for a higher price followed by a sudden collapse in said price, something other than a bubble.
- shitgoose 9y ago
  author never said "it is not a bubble". he said "the story is mostly wrong".
  - contravariant 9y ago
    If the Tulip mania was in fact "a Dutch financial bubble" then it seems to me the story is mostly right. Apparently some aspects like the government stepping in or the Dutch economy suffering may have been embellished a bit, but I've only ever heard those parts from people who claim the story has been embellished.
shitgoose 9y ago
http://www.telegraph.co.uk/news/2017/11/16/leonardo-da-vincis-salvator-mundi-sells-450-million-342-million/ http://www.telegraph.co.uk/news/2017/11/16/leonardo-da-vinci... this counts as many many homes, and no one seems to flinch. we don't know who bought 5,000 guilder tulip, but we can assume that he could afford it. _Is this evidence of absence, or absence of evidence?_ author spent a long time in archives studying this particular subject. this is evidence of absence. in any case, even at inflated prices, buyers were getting something they could touch. what buyers of $1,450 Amazon share are getting - is totally unclear. no voting rights, no dividends, nothing. one helluva value.
waltteri 9y ago
But you know, one tulip is still worth one tulip. Who cares about some stupid fiat value?

kylell 9y ago

I guess if there is a 50% or more chance that someone will pay more and you would make money then it makes sense, you can't win if you don't risk, those who stay on the side find comfort in calling those who risk, lucky when they win and stupid when they lose.

jypepin 9y ago

most of the interesting point is that it seems like tulip were more part of the realm of art then commodities. People were buying tulips because it was a sign of wealth and taste and a beautiful rare object to display, just like art. People were speculating on those, just like art. But when people do so with Art and pay millions, nobody bats an eye. Bitcoin (and other commodities) might have another underlying reason for why people give them value and decide to speculate on them (just like, say, Wall Street speculating on cattle futures). So yeah, maybe some Tulips were sold the price of houses - but it sounds normal when someone spends millions on a painting. I'm defending any point, just saying I think it's interesting to read this, I never heard before that people were mostly buying tulips because of their symbols, not just for pure speculation.

ozim 9y ago
Nope, they were trading tulip bulbs. You have to store those bulbs in good condition so the flower could bloom. Bulbs are not something you can show off with. Once it blooms it is over you cannot show it off like art. So paying price of a house for something you cannot really show off, will spoil quickly, and you could probably sell to next fool for higher price is pure greedy speculation.
- achamayou 9y ago
  Once it’s done blooming, you can extract the bulb and store it until next year, it works quite well. In dry enough soil, you might even get away with leaving it in the ground.
- pvaldes 9y ago
  Once is blooming your expensive Picasso is now two or four expensive Picassos, and in the next year you'll have maybe 20 picasso or so. And as everybody wants to have it in their houses you could easily sold 10 and keep the other. In the tulipmania some people lost money. The few buyers that knew their stuff, with the expertise to know how to multiply, take good care of them and keep it clean of diseases just get rich. If the unique and rare tulip weren't diseased their owner would became extremely rich and famous. Buying it was the logic choice. The same clone of turkish bulb has been sold each year for entire generations of the same european families. Thousands of years after, is still sought for buyers.
mannykannot 9y ago
You are putting the emphasis on 'speculative' rather then 'bubble'. All speculative markets go through bubble-like phases, and your success in speculating in a market depends quite a bit on your ability to understand what is driving prices in that particular market during the times you are active in them, and in understanding when, and to what extent, they are bubbling. If one thinks tulips are just like art is just like bitcoin is just like cattle futures, you may not be well-enough informed to speculate successfully in any of those markets.
- 9y ago

bufferoverflow 9y ago

> How is that not irrational? Come on. It's not irrational in the most basic economic sense - supply and demand determines the price. Why is gold so expensive? Around 90% of it is being hoarded, not used industrially. People think it's valuable, the supply is limited, therefore it is valuable. Same with cryptocurrencies. Actually, particular cryptocurrency supply is truly limited, unlike gold, which is extremely abundant in our universe. The only weird thing about the tulipmania is that tulips can be (relatively) easily grown.

joosters 9y ago
Actually, particular cryptocurrency supply is truly limited, unlike gold, which is extremely abundant in our universe. Depends what you mean by a 'particular' cryptocurrency. There's certainly been no sign of a limit on bitcoin, what with all its forks. And there's no end of alternative copycat coins filling the list at coinmarketcap.com. You have to take a leap of faith to trust that miners won't change the system once all the 'limited' 21 million original bitcoins have been produced...
- tlrobinson 9y ago
  Ultimately miners aren’t in charge. If miners try to change the rules, but the majority of users ignore them, the miners’ fork will be close to worthless.
  - pbhjpbhj 9y ago
    Doubt you need miners in order to process transactions, how would you do it without any miners?
    - Libturd 9y ago
      are you serious? lulz
    - deleted 9y ago
      [deleted]

barry-cotter 9y ago

>>Although it’s true that the most expensive tulips of all cost around 5,000 guilders (the price of a well-appointed house)... >How is that not irrational? Come on. Rolex, Vertu, Louis Vuitton, Patek Philippe, Coach, Armani. All of these are luxury brands. Their products range from very expensive to more than the average person will earn in a lifetime, never mind the price of a well appointed house, all for goods which are at best five times as mass market equivalents that cost less than 1% of their price. And they're worth it to t least some of their buyers either because they believe the difference in quality is worth it or because they understand signalling. https://en.wikipedia.org/wiki/Signalling_%28economics%29 https://en.wikipedia.org/wiki/Signalling_%28economics%29 You may have heard that Elon Musk recently launched a sportcar into space. The Netherlands had rich people who could afford to spend money on things they enjoyed too. There's no accounting for taste. https://en.wikipedia.org/wiki/De_gustibus_non_est_disputandum https://en.wikipedia.org/wiki/De_gustibus_non_est_disputandu...

fnovd 9y ago
People typically don't buy luxury bags with the hope of selling them for a profit, though.
- kgwgk 9y ago
  Some people do: https://www.theguardian.com/culture/shortcuts/2016/jan/17/the-birkin-bag-a-better-investment-than-stocks-and-shares https://www.theguardian.com/culture/shortcuts/2016/jan/17/th...

infodroid 9y ago

What is often overlooked and misunderstood is that the bulbs were not only valued for their beauty, but more importantly for their use as commercial breeding stock. Since it was not possible to reproduce the best bulbs through seed propagation, the already rare buds themselves were the only source of producing future varieties exhibiting the same beautiful patterns. This goes a great way to explaining the high prices paid, and debunking the myth of irrationality. "The tulip market involved only bulbs affected by a mosaic virus which had the effect of creating beautiful, feathered patterns in the flowers. Only diseased bulbs were valued by traders, because a particular pattern could not be reproduced through seed propagation. Only through budding of the mother bulb would a pattern breed true." - Garber, Famous First Bubbles https://www.aeaweb.org/articles?id=10.1257/jep.4.2.35 https://www.aeaweb.org/articles?id=10.1257/jep.4.2.35

jon_richards 9y ago
Just because something is limited in supply and capable of reproducing doesn't mean it inherently has value in the context of the greater economy. I don't think this "debunks" the irrationality of tulips. When the price crashed, they weren't left with a tulip they could continue to breed and make a living with, they were left with a worthless tulip. I'll admit irrationality is hard to define. One could argue the entire art in industry is irrational, but given how low it's been around, it's safe to assume it ties into some fundamental irrationality in us that in turn makes it rational.
- darawk 9y ago
  Yes, but the discounted present value of that tulip's reproductive capacity into the future is much more justifiable to value so highly. It turned out not to be a good investment, but that doesn't make it irrational. Had a moderately good tulip market persisted, it may have justified paying such a high price for uniquely high quality bulbs, because you could turn them into a productive asset by breeding them.

matwood 9y ago

> How is that not irrational? Come on. This kind of statement always interests me in an socio-economic sense. What is rational? What it often comes down to is a personal "my choice is the rational one, and everyone else is irrational". Take an iPhone for example. There are much cheaper phones out there, so is everyone buying an iPhone irrational? And then it only follows, is everyone who buys Apple stock irrational? Additionally, bubble is a term I find thrown around too easily. It seems any time an asset price is high, people immediately think bubble. A high asset price is not enough. The price must be far beyond some underlying value. The rub is determining value. Is BTC in a bubble? The price is high, and has been very volatile, but what is the value? With my laymen knowledge of BTC, I think the value is certainly > 0$, but is it < 10k? I don't know. Thinking about this reminds me of the housing bubble. In Vegas house prices made no sense because there is literally land as far as you can see in every direction. Where I live now, there were also clear disconnects from value and price (crappy apartments turned into crappy condos), but not every piece of expensive property was selling way beyond its value. There are properties along the water or on the beach that really are in short supply. Those barely moved down when the housing bubble popped. Defining 'value' is also a fun conversation, but I've rambled on too long :)

contravariant 9y ago

The author seems to go through great lengths to call a phenomenon where people bought something to sell it for a higher price followed by a sudden collapse in said price, something other than a bubble.

shitgoose 9y ago
author never said "it is not a bubble". he said "the story is mostly wrong".
- contravariant 9y ago
  If the Tulip mania was in fact "a Dutch financial bubble" then it seems to me the story is mostly right. Apparently some aspects like the government stepping in or the Dutch economy suffering may have been embellished a bit, but I've only ever heard those parts from people who claim the story has been embellished.

shitgoose 9y ago

http://www.telegraph.co.uk/news/2017/11/16/leonardo-da-vincis-salvator-mundi-sells-450-million-342-million/ http://www.telegraph.co.uk/news/2017/11/16/leonardo-da-vinci... this counts as many many homes, and no one seems to flinch. we don't know who bought 5,000 guilder tulip, but we can assume that he could afford it. _Is this evidence of absence, or absence of evidence?_ author spent a long time in archives studying this particular subject. this is evidence of absence. in any case, even at inflated prices, buyers were getting something they could touch. what buyers of $1,450 Amazon share are getting - is totally unclear. no voting rights, no dividends, nothing. one helluva value.

waltteri 9y ago

But you know, one tulip is still worth one tulip. Who cares about some stupid fiat value?