[infodroid]

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

[jon_richards]

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]

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.