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The richest families in Florence in 1427 are still the richest (2016) (qz.com)
338 points by SQL2219 on Feb 2, 2017 | hide | past | web | favorite | 89 comments

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

That describes everyone who is from old money. Those who aren't frugal and cost conscious see wealth exit their family within a few generations.

> 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."

Yes, that's what it looks like.

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 ?

Holding value in land typically means involvement in agriculture, though.

Yes, but agriculture became less a source of great wealth during the industrial revolution. Trade probably continued to be quite profitable, though.

Agriculture isn't the way to riches anymore, but holding all the former farmland is.

Say your ancestor Rich Grosvenor owned the village of Belgrave near Westminster Cathedral and the farmland around it - then just by holding on to it, watching it as it becomes prime urban real estate and living off the million-pound rents you and your children can't avoid becoming billionaires a dozen times over. Then you can proceed to buy and sell the British government and media at your pleasure, having been made a duke and a lord of the realm...

This phenomenon is exacerbated by selling leases rather than freehold rights. A leasehold may expire after 99 years, at which point it reverts to the original freeholders and can be sold again. In this manner the same land can be sold repeatedly, generation after generation, and is how the Grovenor family acquired such huge wealth.

In America, we call a version of this "redneck retirement" where a rural landowner is able to sell his property to a real estate developer when it is subsumed by urban sprawl.

That only works if your land is located in the right place, though. I suspect it didn't work as well in, say, the Midlands.

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.

It's become painful to me to listen to most well-intentioned folks debate estate taxes and wealth inequality. So few understand what wahern describes above. The whole debate is a school of red herrings. European tax law is even more of a mess than the US in this regard; even if some practices are eventually ended here, whether in 10 years or 100 years, I have little doubt they will continue on unabated most everywhere else.

I agree it is important to understand the loopholes, but the debate is still important: regardless of which side you fall on, it is important whether society thinks it is just or unjust for wealth to be propegated indefinitely and exactly to one's heirs.

In the US we have a mixed bag of libertarians who think it just and egalitarians who think it unjust. If you ever want to see either the token estate tax ended or the loopholes closed, and not just indefinitely moan over the imperfect world we live in, you have to make your case. Arguing over the estate tax is a reasonable proxy: if you could actually convince people the estate tax was important and necessary, they would also be inclined to believe we should close the loopholes.

There is no such thing as "European tax law" as every European country has different tax system (i.e. some tax estate, some don't). Though some EU wide regulations apply. Furthermore, European countries are among the most equal countries by wealth in World[0], so it's not fair to to call it "red herring".

0. https://en.wikipedia.org/wiki/List_of_countries_by_income_eq...

Interesting comments, wahern and nugget. Could you elaborate or point to some primary/secondary sources?

Control of the distribution of wealth and income is certainly a tricky, multi-faceted challenge that society had to face since the beginning of civilization, and certainly will have to face many a day.

> It's become painful to me to listen to most well-intentioned folks debate estate taxes and wealth inequality. So few understand what wahern describes above.

Can you talk us through what exactly it is that we misunderstand, and what the correction would be?

nugget was concurring with what the parent post said; that people don't understand that the wealth tax is irrelevant and that money is instead passed down via trusts that are designed so as not touched by the wealth tax.

If a wealth tax has a loophole exception for wealth, is it really a wealth tax at all?

I mostly agree with your post. As a financial planner by trade, I'd like to add to it.

In the proposals floating around to repeal the estate tax, there is at least one that suggests repealing the tax entirely but then not giving estates the step up in cost basis.

This has a set of interesting results, including paying no tax until an asset is sold. For instance, if your parents bought at&t stock at $10, and it's worth $20 when you inherit it, you pay no tax. But when you sell it, let's say at $25, you will pay capital gains tax on the difference between the sell price and the _original_ buy price. Estate tax right now gives a step up in the cost basis regardless of whether the tax limit (roughly $10million) is ever hit.

And just to cover the topic, there are two main reasons against the estate tax. The first is that the state has no right to that money. The second, thought, is much more problematic. If you inherit a business, valued at $20 million, you'd have to pay estate tax of roughly $5 million upon your inheritance. If you just owned the at&t stock I referred to above, no big deal - sell some, pay the tax, and walk away with your remaining $15 million.

But if you have a family business, the effects can kill the business. For instance, if your parents own a retail outlet or manufacturing facility, you can't easily sell part of it.

The US has never had an issue with permanent wealth like Europe has, even for the hundreds of years before the estate tax was put in place.

Do you have a reference on the states and trusts which need to be foreclosed?

A quick Google search found a PDF with this list:

  Eight states have repealed the rule against perpetuities.
  These states are Alaska (repealed the rule for vesting of
  property interests), Delaware (repealed entirely for
  personal property interest held in trust; 110 year rule for
  real property held directly in trust), Idaho, Kentucky
  (repealing the rule interests in real or personal property),
  New Jersey, Pennsylvania, Rhode Island, South Dakota.

  Nine states have adopted longer fixed periods for the rule
  against perpetuities, sometimes only for certain types of
  property. These states are Alabama (100 years for property
  not in trust; 360 years for property in trust), Arizona (500
  years), Colorado (1,000 years), Delaware (110 years for real
  property held in trust); Florida (360 years), Nevada (365
  years), Tennessee (360 years), Utah (1,000 years),
  Washington (150 years).

  Source: http://www.actec.org/assets/1/6/Zaritsky_RAP_Survey.pdf
In those states--even the ones with the absent or absurdly long vesting period limitations--there may be other rules that make it hostile for multi-generational trusts. But I'm pretty sure that in at least a few of them you can do exactly that. But I don't know enough about estate law to be able to point them out without further research. Much like the laws leveraged by lawyers and accountants who help the rich move their money off-shore, they don't generally discuss this stuff in public forums. But it's not nearly as secret or esoteric, so with some effort it should be easy to figure out which states are attracting the most business, so to speak.

Which reminds me: there are of course plenty of foreign jurisdictions that allow you to create multi-generational trusts (or trust-like devices) without any problem.

If you were establishing a multi-generational trust you'd want to put it in a politically, economically, and legally stable jurisdiction. Historically those options were limited to the U.S., U.K., and maybe a couple of other European nations. That's less the case now. But who knows what the world will look like in a 100 years. There's plenty of reason to want to keep money in the U.S. So I wouldn't argue that U.S. law is inconsequential in the face of foreign options. I just don't see us returning to an earlier time wrt restraints on generational wealth transfers. The viability of foreign options makes it even more difficult to reverse the trend.

Trusts are able to move as well - so if a state passes unfavorable trust laws, trusts can (and will) re-domicile into friendlier jurisdictions.

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.

Countries without estate taxes: Canada, Australia, New Zealand, Norway, Sweden, etc.


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.

The current U.S. federal estate tax threshold is so high ($5.5m for an individual, or $11m for a couple) that it only hits the wealthiest 0.2% of estates, not your typical small businessperson.

In addition, a large proportion of the "family farms" complaining about the estate tax are sham farms, essentially real-estate investment vehicles that throw a handful of cows on them in order to qualify for farm subsidies and property-tax exemptions. This is an especially popular kind of "family farm" in exurban Texas. There are genuine family farms, but they are much rarer than the number on paper, and typically don't, coincidentally, happen to hold as much prime investment land.

Well, your anecdote may apply in Texas. It does not match the experience of my extended family in Iowa and Minnesota. (currently doing estate taxes for my father-in-law's dairy farm, FWIW).

The current estate tax threshold largely misses real family farms, but it doesn't have to move much to become a disaster. When I was in high school I personally witnessed neighbor widdows being beggared by the then ridiculous estate tax threshold. That memory is seared into my brain.

> taxpayers data in 1427 was digitized and made available online

Wow, the Renaissance was really ahead of its time.

If I recall correctly, they invented banking. So, yes, they were really advanced.

Yes, indeed because it allowed wealth creation (=businesses) to flourish. Lending is an act of faith in the future.

Article is from 2016, and had extensive discussion last year


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.

>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

Not if your children exclusively marry other wealthy people. Then the rate of dilution depends primarily on the growth in the overall population of the wealthy in each generation. The Italian population overall has quintupled since the 1400s, even if we make an allowance for the wealthy having more living children who reproduced, the wealth will not have diluted away completely.

But it's earnings, not wealth. 5% isn't that much. 5% might be name recognition leading to more favorable outcomes when searching for employment. Hell, it might be genetic -- 5% might be from merely being TALLER.

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.

still, it would be a very large web, large enough to encompass several families, not just one.

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.

He just got to 2^30, which implies a 20 year generation time. Pretty reasonable before the 20th century.

This is hilarious. Given that the world's population is 7 billion today, we started with (7x2) people 600 years ago? LOL. Doesn't check out.

Hilarious indeed. Are you aware that people die? :D

It's not forgetting death that's the error; it's forgetting that people have 2^30 ancestors from 30 generations ago rather than just one. Everyone's family tree grows exponentially, but they all overlap.

There had been roughly 120 billion humanoids living (and dying) so far. Not sure where cut-off line between apes and homo sapiens exactly is though. The growth is +- exponential. So 1 billion doesn't mean much (and yes all overlaps with other trees, so voila we have present). Plus many people died before having kids, tough times it were.

Clearly just a rounding error... ;)

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!

Username checks out.

Oh cmon! That was funny!

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.

The paper: http://www.nber.org/papers/w19348

The podcast: http://freakonomics.com/podcast/would-a-big-bucket-of-cash-r...

I don't disagree. On the other hand, if I had to pick a strategy for being rich in year n+1, I'd choose being rich in year n.

Fun anecdote, but to say something universal about families and wealth over centuries, you'd have to look at vastly more regions.

Especially since this is talked about for being so different from the norm.

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'm in favor of inheritance taxes as I see it as taxing income of the inheritors. I don't see any rational reason why income from this one source should be exempt of taxation.

Wealth transfers from parent to child happen way before the death of the parent.

Inheritance tax is not an effective way to avoid this. A different solution is needed

One reason can be double taxation. Normally all income and capital growth would already have been taxed.

Pretty much everything is subject to multiple taxes. For example, the money you spend after income taxes are deducted may further be taxed by the means of sales taxes. Or, the money you invest from your taxed income might be subject to capital gains taxes.

all legally obtained riches were already taxed as per law at the time of earning it. so this is double taxation, and a massive punishing one.

same as if you sell a thing you already paid VAT for - new buyer then should also pay VAT on selling price, right? foreign person shouldn't be favored better than your own children.

> the U.S. now has less class mobility than most of Europe does

Europe is big. I don't think the United States is less mobile than Italia.

You also have to account for the "spread" in classes. If income equality is lower, there is a greater spread in income from the bottom to the top. And the inverse if income equality is higher.

Thus, you could have someone in the US start out making $30K, then make $200K over their lifetime. Due to the spread in "classes", they might have only jumped up on class even though their income went up 6x.

In Europe, where the classes have less spread, someone could have gone from $30K to $100K and gone from the bottom to the top class.

Yes, mobility across classes is greater in Europe, but the American has the bigger increase in income.

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.

>It’s a trait shared by elite families in China, whose high status has persisted since the Mao years.

Well, but that's just about 60 years...

Makes a good argument for the inheritance tax

Why is this so bad it needs to be taxed?

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.

This is hard to believe.

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.

Not in a patriarchal society: only the male inheritance counts as "family" there.

"the history of all hitherto existing society is the history of class struggles" -- Karl Marx, Communist Manifesto.

To a man with a hammer, every problem is a nail.

To a man with a hammer and sickle, every problem is a class struggle.

That is a brilliant aphorism. I shall make good use of it.

To a liberal, every problem is a market problem

To a normal person the title is an argument against taxation. To a socialist it's the proof that taxes ought to be higher.

Anything but, the title literally states that social mobility in Florence is very low, and that capital is more valuable than labor. Bring back the death tax at 90%!

He is calling you a socialist, and implying that you are not normal.

I know and get that, he is an extremist that believes that the landed gentry deserve to rule over the landless serfs. I oppose that destructive policy, as it is a great way to stifle society as a whole and ensure we slide back towards the dark age.

Don't straw man his argument like that. I take it we both consider social mobility good for society. In that frame, defend the estate tax - does it improve social mobility? More than it costs? More efficiently than, say, a Georgist tax, or a basic income?

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