Financial instruments’ duality and public policies – The Tulipmania case

The purpose of the research – of which this text presents only a first part – is to show that the duality specific to financial instruments – positive role in market growth and counteracting risks, respectively negative role through speculative massification – is influenced by public policies. Assuming the crises as moments of truth, I analyse various data for Tulipmania, Great Depression and Great Recession and how they evolve under the impact of public policies. My hypothesis is that with the development of capitalism, the public policies have an increasing impact on the duality of financial instruments, namely a negative one. Here I present only a few methodological aspects and the Tulipmania case – the other two cases I will present at the FIBA session – where public policy intervention has been minimal: both the previous one, regulating the financial instruments and the tulip market, and the later one, for liquidating the crisis and its consequences. The impact of the crisis on the Dutch economy and society at the time was relatively small; bubbles and similar crises did not occur later in the Netherlands. The analysed data highlight the following stage results: a). the free market is not immune to the effects of the duality of financial instruments, but b). it has the capacity to educate market players, to avoid moral hazard and, in the long run, to reduce risks. The lesson is that minimal market intervention does not distort its operation, it does not introduce additional negative elements.