This subject has been raised in this thread. I don’t want to hijack that thread with a debate.
There are two contrasting views on the subject of Tulipomania. Which one should I trust?
The popular view expressed in Charles Mackey’s book here tells of frenzied public speculation. People invested huge sums of money to buy tulip bulbs in the expectation that the price would keep rising, and lost the lot when the price collapsed.
But an alternative view claims the popular view is distorted. See this essay (PDF warning). According to this analysis, (if I’ve understood it correctly) the prices did rise sharply, then fall but :
it was caused not by wild public speculation, but by an unwise change in the rules governing trading.
The rise and fall happened in a very brief period, and localized area.
At peak, the tulip prices were only 20 times their previous level, nowhere close to the inflation claimed in the popular view. Not to the level of selling a luxury house to buy a single bulb, anyway.
The people involved were professionals, tulip farmers and flower market traders. Members of the public were not investing in tulip bulbs.
The buyers had options contracts and were only obliged to pay a small fraction of the price when they didn’t exercise their options.
So, doper historians, which of these is the accurate one? Which one should I believe? To me, the second one seems more plausible and better cited.
I’ll let those more expert on the economics discuss the merits of the competing explanations while I note that Gerber’s short Famous First Bubbles (MIT, 2000) is worth reading and is certainly sufficient to cast doubt on the historical accuracy of many of Mackay’s details.
Mackay’s research was virtually non-existant: he basically lifted and elaborated the earlier account by Johann Beckmann, while screwing up some of the citations. (Gerber goes so far as to describe this as plagiarism.) His sources in turn were a series of contemporary pamphlets attacking the speculators on moralistic grounds. As an example of their bias, Gerber points out that they are full of stories of general depression the “mania” left in its wake, yet there’s no independent evidence for such distress in other sources of the period.
Several of the most vivid stories turn out to be based on misreadings or are thinly sourced.
Gerber’s most striking suggestion concerns the end-phase, when non-professionals entered the market and focus on non-rare bulbs:
But, as far as I can see, he’s merely putting this “they were taking the piss” explanation forward as an hypothesis, rather than a definite conclusion, for that particular phase.
More generally, I wouldn’t trust Mackay as a reliable sole source for anything. He’s interesting to read and he has often been influential, but the book is extremely dated and has invariably been superceded by later research.