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Against Tulip Subsidies — LessWrong

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Imagine a little kingdom with a quaint custom: when a man likes a woman, he offers her a tulip; if she accepts, they are married shortly thereafter. A couple who marries sans tulip is considered to be living in sin; no other form of proposal is appropriate or accepted. One day, a Dutch trader comes to the little kingdom. He explains that his homeland also has a quaint custom involving tulips: they speculate on them, bidding the price up to stratospheric levels. Why, in the Netherlands, a tulip can go for ten times more than the average worker earns in a year! The trader is pleased to find a new source of bulbs, and offers the people of the kingdom a few guilders per tulip, which they happily accept. Soon other Dutch traders show up and start a bidding war. The price of tulips goes up, and up, and up; first dozens of guilders, then hundreds. Tulip-growers make a fortune, but everyone else is less pleased. Suitors wishing to give a token of their love find themselves having to invest the

x Against Tulip Subsidies — LessWrong Economics and Efficiency Economics Personal Blog 65 Against Tulip Subsidies by Scott Alexander 6th Jun 2015 9 min read 9 65 I. Imagine a little kingdom with a quaint custom: when a man likes a woman, he offers her a tulip; if she accepts, they are married shortly thereafter. A couple who marries sans tulip is considered to be living in sin; no other form of proposal is appropriate or accepted. One day, a Dutch trader comes to the little kingdom. He explains that his homeland also has a quaint custom involving tulips: they speculate on them, bidding the pri

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