Tuesday, 9 April 2013

Extraordinary popular delusions and the madness of crowds

Tulpenmanie is how the Dutch refer to the period in the Dutch Golden Age just after the tulip was introduced to Holland. The tulip was different to any other flower known in Europe at the time with its saturated intense petal colour and everyone wanted in on it. At the height of tulip mania, some single bulbs sold for more than 10 times the annual income of a skilled craftsman.

This communal frenzy for a flower resulted in what has come to be considered the first recorded speculative, or economic bubble. Prices reached extraordinary heights and then collapsed. This rapid rise and fall is difficult for economists to explain and assessment of this period continues with controversial theories being put forward and arguments hotly debated.

* The title of this post refers to the 1841book by Scottish journalist Charles Mckay in which he outlines the folly that takes hold of the collective consciousness of a people in the face of economic, philosophical and social trends.

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