A standard critique of markets is that they’re prone to wold miscalculations of “real” value.A prime example being Tulipmania when, as The Observer tells us:
Each of the 104 pages in Nicolaes Tulp’s book of tulips contains a watercolour painted by the artist Jacob Marrel, with a record of the market values of the bulbs at the height of 17th-century tulip mania, the world’s first speculation bubble. The catalogue bears testament to a period in the 1630s when the Netherlands was the richest country in the world and single tulip bulbs would sell for more than 10 times the annual income of a skilled worker. However, the market crashed dramatically in 1637.
The thing being that tulips really were worth that sort of sum for that short period of time. People would pay that for them – thus they were worth that. It’s not even obvious that those prices were wrong in the sense normally used. The world’s cut flower market still operates from a few sheds just outside Schipol Airport. What’s the long term value of that?
Four centuries on, market forces have had their way again. The catalogue, now valued at €750,000 by Sotheby’s, faces being sold abroad to the highest bidder by one of Tulp’s descendants, unless an appeal aimed at saving it for the Dutch nation manages to attract sufficient funds. To block the plan to sell the book abroad, a crowdfunding effort has been launched by Jan Six van Hillegom X, another descendant of Tulp, who is furious about the move to sell it overseas.
Well, saving it for the nation so often means the taxpayer is going to have to stump up for it. And that’s where this story gets it entirely and wholly correct:
Jan Six’s mission is to find 104 sponsors – one per page – to donate €7,500 each to save the book for the Netherlands. “I can’t afford to put that money down on my own,” he said. “If we don’t get the numbers, then I don’t think it is necessary to keep it in Holland; [it would show] there is no interest in it. I will take it to Saudi Arabia and sell it to a sheikh. But that would be a dark page for me.
What is the value to the nation of that book? What the individuals in the nation are prepared to pay for that book. Market prices are the correct prices, they are the true value. The story about the Tulip Book rather confirming the value of tulips back in Tulipmania.