Don Deglopper began working in Lukang in 1967 and 1968 as an anthropologist, and has continued his research there over the years. Here is an excerpt, edited to simplify the English, that I used in a class on Taiwan a few years ago. 

During the nineteenth century, Lukang was a city of wholesalers and middlemen, with many large firms in the trade in rice, cloth, sugar, timber, and pottery. Oxcarts and gangs of workers moved through its narrow streets, carrying the two annual rice harvests from inland. Hundreds of workers loaded and unloaded the bamboo rafts and small boats that carried cargo to the larger ships in the harbor channel. Thousands of men carried bales of rice across the Changhua Plain on shoulder poles, while some walked down from the mountains carrying goods from the forests. No one knows how this army of workers earned their living during the winter when Lukang port shut down. 

Lukang's merchants lived in big houses, the bricks and tiles of which had been imported from Fukien. The shoes they wore, the dishes they ate from, the paper they wrote their accounts on, and even the ancestor tablets they worshipped were all made by craftsmen in Fukien and shipped across the Straits. Lukang had official buildings, granaries, warehouses, temples, and academies, and was the site of magnificent annual festivals and displays of wealth. But it produced practically nothing for itself, and depended on the trade that exchanged the rice and agricultural produce of central Taiwan for the cloth and manufactured goods of southern Fukien. 

By the second half of the nineteenth century Lukang's total share of Taiwan's trade and its relative importance in the island's economy had begun to decline. This may have been the result of a decline in the volume of trade at the city, but more likely was caused by the economic growth of the northern part of the island and by changes in Fukien's rice trade. 

The years after 1875 saw the development of the tea industry in northern Taiwan. Foreign firms, mostly British, set up businesses in Taipei, and the Japanese began exporting  manufactured goods like textiles and matches to Taiwan. Taipei grew rapidly, and labor in the northern third of the island was so scarce that tea-pickers had to be brought in from Fukien each year. 

Lukang's primary export had always been rice, but the rice trade appears to have fallen by the end of the nineteenth century. Taiwan's population grew and more rice was eaten by the city dwellers, tea-pickers, and coal miners of the north. Fukien did not have any problems, for it was able to import rice from Southeast Asia at a lower price. Since no steamship, even of moderate size, could get anywhere near Lukang or safely enter the shallow harbor, the sailing ships sailing in and out of Lukang were not directly threatened.

But Lukang's trade with the mainland was threatened indirectly when large steamships were able to bring rice from Southeast Asia more cheaply than it could be shipped over from Taiwan in small ships. And any improvement of land transport, even in Fukien, directly threatened Lukang. The city functioned as a port, in spite of silt, tidal mud flats, the necessity of employing gangs of workers to load everything into small ships by hand, and the danger of storms and shoals in the Straits, only because there was no better way to move things into and out of the Changhua Plain.

The only available figures on Lukang's trade and population are those published by the Japanese colonial government...the only figure I have found is a statement quoted by Wang Shih-ch'ing, probably from an early Japanese source, that in the early years of the Hsien Feng period (1851-1862), just before the long decline began, over 3,500 ships came to Lukang each year. In 1896 the Japanese customs authorities counted 1,051 ships coming to Lukang, although that number declined to 515 in 1897 and to 229 in 1900. 

By the end of the nineteenth century the trading system linking central Taiwan and the China coast was already declining as the rice trade gradually disappeared and Japanese imports began to replace Fukienese cloth. Under the Japanese the commerce between Taiwan and Fukien shrank further and the trade of Lukang, by then only a minor port, almost died. The Japanese built roads and the railroad, and so made it possible to move goods into and out of the Changhua Plain more cheaply than they could be shipped through Lukang's silt-choked harbor. The colonial government developed Keelung and Kaohsiung (then called Takao) as modern, deepwater ports…

Lukang was left with a commercial population far too large to support itself by selling things to local villagers. Some of its wealthy merchants looked for new investments and bought farm land. They favored the highly productive land around the town of Yuanlin, twenty kilometers to the southeast. Some simply became landlords and lived on their rents. But others, recognizing that they could not defeat the modern transport technology that had destroyed the city's commerce, chose to join it and moved to Taipei or the booming port of Kaohsiung. The first decade of the twentieth century saw massive emigration from Lukang. By the end of the nineteenth century some Lukang businessmen had already established themselves in the thriving commercial quarter of Taipei, a city that was rising as Lukang fell. They were soon joined by crowds of their fellow townsmen. Lukang, which had been settled by emigrants from southern Fukien, now produced its own emigrants. In the Taiwan of the early Japanese period, an agricultural society undergoing rapid economic development and urban growth, the Lukang emigrants with their greater commercial expertise and literacy had an advantage over ordinary Taiwanese from the countryside. Furthermore, they did not go to Taipei, Kaohsiung, or Puli as individuals. They went with introductions to other Lukang men who had already established themselves, and they joined the Lukang associations that existed in all Taiwan's major cities. (A Lukang Guild was founded in Taipei in the late1800s, before the Japanese conquest, and was one of the five great guilds of Taipei.)

Koo Chen-fu (辜振甫), son of the builder and chairman of the Taiwan Cement Company, donated the building and much of its contents for use as a museum. Its doors were opened to the public in 1973.

On the whole, I recommend the Museum, but with certain reservations that will become clear. The price is $130 for an adult, $70 for a kid.