The 1637 event gained attention in 1841 with the publication of the book Extraordinary Popular Delusions and the Madness of Crowds, written by Scottish journalist Charles Mackay, who wrote that at one point 5 hectares (12 acres) of land were offered for a Semper Augustus bulb. Mackay claimed that many investors were ruined by the fall in prices, and Dutch commerce suffered a severe shock. Although Mackay's book is often referenced, his account is contested. Many modern scholars believe that the mania was not as destructive as he described.
The Dutch tulip business
The introduction of the tulip to Europe is often attributed to Ogier de Busbecq, the ambassador of Charles V, Holy Roman Emperor, to Sultan Suleiman the Magnificent, who sent the first tulip bulbs and seeds to Vienna in 1554 from the Ottoman Empire. Tulip bulbs, along with other new plant life like potatoes, peppers, tomatoes, and other vegetables, came to Europe in the 16th century. These bulbs were soon distributed from Vienna to Augsburg, Antwerp, and Amsterdam.
Southern Netherlandish botanist Carolus Clusius is largely responsible for the spread of tulip bulbs in the final years of the 16th century; he planted tulips at the Vienna Imperial Botanical Gardens in 1573. He finished the first major work on tulips in 1592, in which he noted the colour variations. Their popularity and cultivation in the Dutch Republic (now the Netherlands) started in earnest around 1593 after Clusius had taken up a post at Leiden University in the newly established Hortus Botanicus. He planted his collection of tulip bulbs in a teaching garden and his private garden in late 1593, and found that they were able to tolerate the harsher conditions of the Low Countries. Shortly thereafter, the tulip grew in popularity.
Speculative period
As the flowers grew in popularity, professional growers paid higher and higher prices for bulbs with the virus, and prices rose steadily. By 1634, in part as a result of demand from the French, speculators began to enter the market. The contract price of rare bulbs continued to rise throughout 1636. By November, the price of common, "unbroken" bulbs also began to increase, so that soon any tulip bulb could fetch hundreds of guilders. Forward contracts were used to buy bulbs at the end of the season.
Traders met in "college" at taverns and buyers were required to pay a 2.5% "wine money" fee, up to a maximum of ƒ3,- per trade. Neither party paid an initial margin, nor a mark-to-market margin, and all contracts were with the individual counter-parties rather than with the Exchange. The Dutch described tulip contract trading as windhandel ('air trade'), because no bulbs were actually changing hands. The entire business was accomplished on the margins of Dutch economic life, not in the Exchange itself.
Modern views
Mackay's account of inexplicable mania was unchallenged, and mostly unexamined, until the 1980s. Research into tulip mania since then, especially by proponents of the efficient-market hypothesis, suggests that his story was incomplete and inaccurate. In her 2007 scholarly analysis Tulipmania, Anne Goldgar states that the phenomenon was limited to "a fairly small group", and that most accounts from the period "are based on one or two contemporary pieces of propaganda and a prodigious amount of plagiarism". Peter Garber argues that the trade in common bulbs "was no more than a meaningless winter drinking game, played by a plague-ridden population that made use of the vibrant tulip market."
While Mackay's account held that a wide array of society was involved in the tulip trade, Goldgar's study of archived contracts found that even at its peak the trade in tulips was conducted almost exclusively by merchants and skilled craftsmen who were wealthy, but not members of the nobility. Any economic fallout from the bubble was very limited. Goldgar, who identified many prominent buyers and sellers in the market, found fewer than half a dozen who experienced financial troubles in the time period, and even of these cases it is not clear that tulips were to blame. This is not altogether surprising. Although prices had risen, money had not changed hands between buyers and sellers.