Not surprisingly, the qz.com article distorts the meaning of the original paper and looking at the comments, they seem to follow the false, but suggested interpretation of the paper that qz gives.
It's useful to note the title of the paper: What’s your (sur)name? Intergenerational mobility over six centuries. This paper is not tracking wealth, it's tracking income via tax records. It notes things like people who are lawyers or bankers now were more likely to share surnames with people in similar professions in the 15th century. It is not tracking inter-generation transfers of wealth.
In fact, qz even drops the most interesting conclusion in the article, which is their measurement of changing intergenerational income mobility overtime. They measure inelasticity at > .8 in Renaissance Florence and a generally static society until the industrial revolution, with inelasticity coming down starting in the 20th century.
The article isn't about secret trusts set up by the Medici, but the more prosaic fact that if you father and grandfather were lawyers, you're more likely to be one too. Still interesting, but it's not evidence that families were "able to maintain their wealth" through revolutions at all.
This also looks like it's more work in the same direction as the "The Son Also Rises" ( http://amzn.to/2jFnUmZ ).
There are actually a lot of studies of this nature, across Europe, Asia and the Americas. This result is not unique to Florence - you get much the same result everywhere in the world.
Furthermore, this result seems primarily driven by factors intrinsic to the people/families themselves and not to the society they live in. There are a number of invisible subgroups (e.g. "New France", or people with names like Bauchau) which underperform or overperform across the generations. And when people shift from one society to another (e.g. West Bengal to America), the effects persist.
But, but... the Medici rule the entire planet from their throne in outer space, Assassin's Creed told me so! (I didn't play much of the series, this is probably not legit). How dare your facts get in the way of my supernaturally attracted perception?
This is purely anecdotal, but I live in Florence and know a couple of people from the "old-money" families and they are not rich by todays standard. They make a modest living renting out and managing the properties handed down through the generations and have to be frugal to make it work.
Also, you should be very sceptical of any study made using Italian tax records as a data source :D
> They make a modest living renting out and managing the properties handed down through the generations and have to be frugal to make it work.
Those rich real estate owners are not frugal because they need to. They are frugal because they are smart. Don't judge their wealth before seeing their tax haven bank accounts.
This only feels surprising to me because in England, aristocratic houses tend to last only 100-200 years before losing their name by being subsumed into another, renaming due to politics, or vanishing in some other way.
The House of Windsor only formally dates back to 1910.
However if you trace it via the Mountbatten line, it'll rate as being as old as 1567, since it comes from a branch of the House of Hesse-Darmstadt in the Holy Roman Empire.
I think there's 3 things that might cause this:
- I am thinking that Florencian plutocratic houses simply never rename themselves. The Medici family for example continues to exist today, holding some minor titles.
- I think it also helps that Italian aristocrats were heavily involved in trade, and other mercantile professions so could continue to hold wealth and power after being deposed from statutory privilege. English aristocrats on the other hand, often only hold value in land.
- The English have historically allowed women to inherit, so family names are lost due to inheritance, enriching others with the same bloodline but different names.
"The House of Windsor only formally dates back to 1910."
House of Wetten (1030) -> House of Hanover (1710) -> House of House of Saxe-Coburg and Goth (1826) -> House of Windsor.
There is a long lineage for the Windsors. Note the name change in 1918 from Saxe-Coburg to Windor to avoid diplomatic incidents by association. To get an idea of the breakdown of English aristocracy and estates, read this insightful article by Charles Spencer, "Enemy of the Estate" ~ http://www.vanityfair.com/news/2010/01/english-aristocracy-2...
"I am thinking that Florencian plutocratic houses simply never rename themselves."
Your comment about the Medici line confused me a bit since I believed them to have ended quite a while back, however there do appear to be two cadet lines still around.
When do you generally consider a line over for the purposes of the study ?
One of the reasons Bill Gate's father among others were campaigning against the repeal of "Estate Taxes" was so we wouldn't have a permanent wealthy class in the US. (Estate taxes are taxes paid on your money when you pass away before being distributed. Right now I think its only on holdings over 5million)
Unfortunately, several states have repealed the common law rule against perpetuities entirely. Long story short, rich people can create trusts that pay a steady income to their families for as long as they want, including for hundreds of years.
There's no estate tax upon your death because the assets were already transferred. The assets aren't taxed on transfer, either, but only as they're paid out to the beneficiaries.
The effect is as if the original grantor (your great Uncle Gates) was immortal, giving out stipends to his descendants.
You don't hear about this much because the state laws are only a few decades old, but the repercussions play out over generations. It'll become a thing in another 100 years or so when people finally realize what's happening.
Before this the trick was to use corporations. Maybe nominally non-profit, but mostly existing to employ the descendants. That's still a good idea depending on what you're trying to accomplish. Like with trusts you create it in a state with friendly legislation.
It sucks that conservatives are so hell-bent on repealing the estate tax, but it's really not a battle worth fighting over. The war was lost long ago. What nominal revenue the estate tax brings in has been shrinking for awhile, and it'll eventually shrink to nothing.
At this point people are just fighting for an idea. And I literally mean _just_ an idea. Retaining the estate tax won't stop anything, and it might give people a false sense of comfort. Maybe better to let it get repealed, then hope that in a few generations there's enough backlash to not only restore the estate tax, but to foreclose the alternatives as well.
Yea, I don't think higher estate taxes will change income distribution at all. There are many ways to pass money, and the real problem isn't inheritance, it's the insider class whose political connections get them government subsidies, handouts, competitive barriers, etc, to get far richer than they could in a free society.
A low estate tax threshold is the destroyer of individual proprietorships and family farms. The impact on farm families is particularly caustic. If you want a world where only large corporations can farm, raise estate taxes.
From the original source: "Stated differently, being the descendants of the Bernardi family (at the 90th percentile of earnings distribution in 1427) instead of the Grasso family (10th percentile of the same distribution) would entail a 5% increase in earnings among current taxpayers (after adjusting for age and gender)."
http://voxeu.org/article/what-s-your-surname-intergeneration...
So 5% extra as the result of being related to a wealthier family 600 years ago. While definitely remarkable when considering how much happened during that time that should have destroyed wealth, it's far from apocalyptic.
There seems to be no implication that the descendants do not have to work either, just that they earn slightly more.
On the contrary, it is staggering that a result is still present after 30 generations of splitting the family wealth.
Even on the assumption that the rich only have 2-3 children, a billion-dollar inheritance should be diluted to nearly nothing after 15 generations. And with the 4-8 children that were usual back in the day, in less than 10 generations.
Having such a massive difference that it can be traced by very low-powered population statistics after 600 years means that the effect on having a head start in terms of wealth is enormous on your potential to stay wealthy.
I don't understand this. Assuming no inbreeding, families that consistently have 2 kids roughly double in size every generation - a 600-year-old family would have 1 billion unique descendants by now. Of course, there is a ton of inbreeding - in the technical sense - but I still have a hard time imagining a 600 year continuous family line that isn't a pretty arbitrary chart of certain descendants here and there. It's very probable that some of them became poor too!
It's a patrilineal family line. Women of the family who bear children are (in most of Europe) considered to have exited the family. In addition, sufficiently distant relationships often break off into cadet branches and stuff like that. There's a whole field behind this weird stuff.
That's not correct; once you reach out a few generations the branch becomes a web as distant relations marry. That's the only way it can work if you think about it.
Your maths seems off. 600 years at, say, 25 years per generation, yields 24 generations. Doubling each generation gives a factor of 2^24, or around 16 million, not 1 billion.
A family having two kids would typically have one girl and one boy, which means the name ("the family") would carry on only half of the time, which means there would be no growth.
You'd need a higher rate to grow just based on that, plus there are untimely deaths and non-reproducing offspring...
"While it comes as little surprise that families pass on their wealth to their children, it’s still somewhat remarkable that these families were able to maintain their wealth through various sieges of Florence, Napoleon’s campaign in Italy, Benito Mussolini’s dictatorship, and two world wars."
When you are a part of the Illuminati, anything is possible!
This makes for a great headline but fails to capture the entire picture which would include "families that are rich now and weren't before" and "families that were rich then and aren't now".
Another interesting statistic has families that were made wealthy in a short time by circumstance (lottery, judgement, IPO, etc) and are still rich, vs those that lost all of their wealth again.
It seems the best way to have the family wealth hang around is to create an institution with it that has as its mission to manage that wealth. Too much control by family members is strongly correlated with losing it all (which isn't too surprising when you think about it).
Wars and conflicts are the large redistributors of wealth. Not that it's a fun way to do so.
The Freakonomics podcast covered this. There have been small-scale examples of this sort of thing but the best researched one is from Georgia.
The tl;dr is that the government stole a huge chunk of land from the Cherokee but the white public got really angry because the politicians intended to split up the land among themselves. To avoid being tossed out of office they setup a lottery and distributed the land randomly. About 20% of Georgia's white population at the time got a huge chunk of land for free. The study shows it didn't have much of an impact on families over the long-term.
No article last year held me in such horror as this one. I haven't dared even discuss it with anyone until now. It still takes my breath away. Especially because the U.S. now has less class mobility than most of Europe does. Automation is likely to be a "Yuuge" force multiplier for societal stratification; certainly modest minimum annual income grants aren't going to change that. All my life I've wanted to believe everything this study disproves. My parents and grandparents worked very hard for their kids because they didn't thing this was really the way the world worked. But it certainly is. If I want to become damned depressed all I have to do is think about it. There's no reason not to enjoy the day 'cause of it, but it is more than a little demotivating.
I have had heated debates over inheritance taxes. I'm strongly against them because I don't like the signaling effect (if you work really hard, the government will take half of it) and it's a strange form of multi-taxation which is also questionable from my POV. I'm very family driven and I think "working hard to make the life of your children better" is a very strong motivator that should not be underestimated.
The counterargument is usually "well let's set the cap at X million" which I find very problematic because I don't see an ethically sound way of defining these lines in the sand. Additionally in the age of webscale(tm) it's reasonably possible to start a "new dynasty" from scratch. Unfortunately most of these debates tend to boil down to "the rich are evil" which is usually when I use interest in them.
I've only roughly browsed the study but the effects aren't that big compared to compound interest from 1427 to now. If anything I'd argue the rich are still rich but not as rich as expected is the take away message.
I think that this effect will have ended with modern gender equality. Each family has on average only one male child per generation, so if you consistently pass the money down to your son (the child with the same surname as you) then it will last a long time. But these days it's more common to give money to all your children, so it's halved at every generation.
I wonder if at some point inheritance of the family wealth was dependent on having a viable offspring to pass the wealth onto. The article does not mention this, but in the 14 and 1500's, I can only assume at some point it was.
Over 600 years, a family of 4 becomes a family of thousands. Take any reasonable sum of money and divide it by 20,000 and its not that big of a sum of money anymore.
I don't think money works that way? Think of the family wealth as starting capital that gives decendants better education, an environment that simulates growth, etc. They take a piece of the family wealth and grow it bigger through good jobs, investments, companies, etc.
[+] [-] gmunu|9 years ago|reply
It's useful to note the title of the paper: What’s your (sur)name? Intergenerational mobility over six centuries. This paper is not tracking wealth, it's tracking income via tax records. It notes things like people who are lawyers or bankers now were more likely to share surnames with people in similar professions in the 15th century. It is not tracking inter-generation transfers of wealth.
In fact, qz even drops the most interesting conclusion in the article, which is their measurement of changing intergenerational income mobility overtime. They measure inelasticity at > .8 in Renaissance Florence and a generally static society until the industrial revolution, with inelasticity coming down starting in the 20th century.
The article isn't about secret trusts set up by the Medici, but the more prosaic fact that if you father and grandfather were lawyers, you're more likely to be one too. Still interesting, but it's not evidence that families were "able to maintain their wealth" through revolutions at all.
[+] [-] yummyfajitas|9 years ago|reply
There are actually a lot of studies of this nature, across Europe, Asia and the Americas. This result is not unique to Florence - you get much the same result everywhere in the world.
Furthermore, this result seems primarily driven by factors intrinsic to the people/families themselves and not to the society they live in. There are a number of invisible subgroups (e.g. "New France", or people with names like Bauchau) which underperform or overperform across the generations. And when people shift from one society to another (e.g. West Bengal to America), the effects persist.
[+] [-] cableshaft|9 years ago|reply
[+] [-] rwinn|9 years ago|reply
Also, you should be very sceptical of any study made using Italian tax records as a data source :D
[+] [-] kobeya|9 years ago|reply
[+] [-] stefantalpalaru|9 years ago|reply
Those rich real estate owners are not frugal because they need to. They are frugal because they are smart. Don't judge their wealth before seeing their tax haven bank accounts.
[+] [-] true_religion|9 years ago|reply
The House of Windsor only formally dates back to 1910.
However if you trace it via the Mountbatten line, it'll rate as being as old as 1567, since it comes from a branch of the House of Hesse-Darmstadt in the Holy Roman Empire.
I think there's 3 things that might cause this:
- I am thinking that Florencian plutocratic houses simply never rename themselves. The Medici family for example continues to exist today, holding some minor titles.
- I think it also helps that Italian aristocrats were heavily involved in trade, and other mercantile professions so could continue to hold wealth and power after being deposed from statutory privilege. English aristocrats on the other hand, often only hold value in land.
- The English have historically allowed women to inherit, so family names are lost due to inheritance, enriching others with the same bloodline but different names.
[+] [-] bootload|9 years ago|reply
House of Wetten (1030) -> House of Hanover (1710) -> House of House of Saxe-Coburg and Goth (1826) -> House of Windsor.
There is a long lineage for the Windsors. Note the name change in 1918 from Saxe-Coburg to Windor to avoid diplomatic incidents by association. To get an idea of the breakdown of English aristocracy and estates, read this insightful article by Charles Spencer, "Enemy of the Estate" ~ http://www.vanityfair.com/news/2010/01/english-aristocracy-2...
"I am thinking that Florencian plutocratic houses simply never rename themselves."
Yes, that's what it looks like.
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] cannonpr|9 years ago|reply
[+] [-] caf|9 years ago|reply
[+] [-] cannonpr|9 years ago|reply
[deleted]
[+] [-] acomjean|9 years ago|reply
http://billmoyers.com/2015/04/18/william-gates-sr/
[+] [-] wahern|9 years ago|reply
There's no estate tax upon your death because the assets were already transferred. The assets aren't taxed on transfer, either, but only as they're paid out to the beneficiaries. The effect is as if the original grantor (your great Uncle Gates) was immortal, giving out stipends to his descendants.
You don't hear about this much because the state laws are only a few decades old, but the repercussions play out over generations. It'll become a thing in another 100 years or so when people finally realize what's happening.
Before this the trick was to use corporations. Maybe nominally non-profit, but mostly existing to employ the descendants. That's still a good idea depending on what you're trying to accomplish. Like with trusts you create it in a state with friendly legislation.
It sucks that conservatives are so hell-bent on repealing the estate tax, but it's really not a battle worth fighting over. The war was lost long ago. What nominal revenue the estate tax brings in has been shrinking for awhile, and it'll eventually shrink to nothing.
At this point people are just fighting for an idea. And I literally mean _just_ an idea. Retaining the estate tax won't stop anything, and it might give people a false sense of comfort. Maybe better to let it get repealed, then hope that in a few generations there's enough backlash to not only restore the estate tax, but to foreclose the alternatives as well.
[+] [-] valuearb|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] refurb|9 years ago|reply
[1]https://taxfoundation.org/estate-and-inheritance-taxes-aroun...
[+] [-] dbcurtis|9 years ago|reply
[+] [-] conistonwater|9 years ago|reply
Wow, the Renaissance was really ahead of its time.
[+] [-] motoboi|9 years ago|reply
[+] [-] tristanj|9 years ago|reply
https://news.ycombinator.com/item?id=11731890
[+] [-] sologoub|9 years ago|reply
So 5% extra as the result of being related to a wealthier family 600 years ago. While definitely remarkable when considering how much happened during that time that should have destroyed wealth, it's far from apocalyptic.
There seems to be no implication that the descendants do not have to work either, just that they earn slightly more.
[+] [-] MagnumOpus|9 years ago|reply
Even on the assumption that the rich only have 2-3 children, a billion-dollar inheritance should be diluted to nearly nothing after 15 generations. And with the 4-8 children that were usual back in the day, in less than 10 generations.
Having such a massive difference that it can be traced by very low-powered population statistics after 600 years means that the effect on having a head start in terms of wealth is enormous on your potential to stay wealthy.
[+] [-] mjfl|9 years ago|reply
[+] [-] eropple|9 years ago|reply
[+] [-] xenadu02|9 years ago|reply
[+] [-] dsymonds|9 years ago|reply
[+] [-] kharms|9 years ago|reply
You'd need a higher rate to grow just based on that, plus there are untimely deaths and non-reproducing offspring...
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] irrational|9 years ago|reply
When you are a part of the Illuminati, anything is possible!
[+] [-] analognoise|9 years ago|reply
[+] [-] ChuckMcM|9 years ago|reply
Another interesting statistic has families that were made wealthy in a short time by circumstance (lottery, judgement, IPO, etc) and are still rich, vs those that lost all of their wealth again.
It seems the best way to have the family wealth hang around is to create an institution with it that has as its mission to manage that wealth. Too much control by family members is strongly correlated with losing it all (which isn't too surprising when you think about it).
Wars and conflicts are the large redistributors of wealth. Not that it's a fun way to do so.
[+] [-] xenadu02|9 years ago|reply
The tl;dr is that the government stole a huge chunk of land from the Cherokee but the white public got really angry because the politicians intended to split up the land among themselves. To avoid being tossed out of office they setup a lottery and distributed the land randomly. About 20% of Georgia's white population at the time got a huge chunk of land for free. The study shows it didn't have much of an impact on families over the long-term.
The paper: http://www.nber.org/papers/w19348
The podcast: http://freakonomics.com/podcast/would-a-big-bucket-of-cash-r...
[+] [-] brudgers|9 years ago|reply
[+] [-] BurningFrog|9 years ago|reply
Especially since this is talked about for being so different from the norm.
[+] [-] mavelikara|9 years ago|reply
[+] [-] Nomentatus|9 years ago|reply
[+] [-] kriro|9 years ago|reply
The counterargument is usually "well let's set the cap at X million" which I find very problematic because I don't see an ethically sound way of defining these lines in the sand. Additionally in the age of webscale(tm) it's reasonably possible to start a "new dynasty" from scratch. Unfortunately most of these debates tend to boil down to "the rich are evil" which is usually when I use interest in them.
I've only roughly browsed the study but the effects aren't that big compared to compound interest from 1427 to now. If anything I'd argue the rich are still rich but not as rich as expected is the take away message.
[+] [-] JumpCrisscross|9 years ago|reply
Europe is big. I don't think the United States is less mobile than Italia.
[+] [-] dimitar|9 years ago|reply
[+] [-] OscarCunningham|9 years ago|reply
[+] [-] TXV|9 years ago|reply
Well, but that's just about 60 years...
[+] [-] BuffaloBagel|9 years ago|reply
[+] [-] TomMarius|9 years ago|reply
[+] [-] at-fates-hands|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] randyrand|9 years ago|reply
Over 600 years, a family of 4 becomes a family of thousands. Take any reasonable sum of money and divide it by 20,000 and its not that big of a sum of money anymore.
[+] [-] FooBarWidget|9 years ago|reply
[+] [-] pjc50|9 years ago|reply