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The richest families in Florence in 1427 are still the richest (2016)
- peteretep 8y agoRelated: "You won’t believe how far into this ‘millennial homeowner’ piece it takes for us to mention their inheritance!"
- jaclaz 8y ago[2016] , discussed: https://news.ycombinator.com/item?id=13555925 https://news.ycombinator.com/item?id=13555925 Actual paper: http://piketty.pse.ens.fr/files/BaroneMocetti2016.pdf http://piketty.pse.ens.fr/files/BaroneMocetti2016.pdf
- OJFord 8y ago> discussed: https://news.ycombinator.com/item?id=13555925 https://news.ycombinator.com/item?id=13555925 [2017], also discussed in 2016: https://news.ycombinator.com/item?id=11731890 https://news.ycombinator.com/item?id=11731890
- deleted 8y ago[deleted]
- netcan 8y agoI would love to know a bit more about mechanism. Is it through family holdings, individual wealth management, sons of well-to-dos becoming proverbial doctors and lawyers. Florence is especially interesting. 15th century Italy had a relatively modern (similar/ancestral to our own) economic-political system. Wealth wasn't all about land-and-title aristocracy. "Merchant" families were the rich powerful instead. Generally speaking, I'm curious about how all thia works on the individual level. Thomas Picketty's ideas about how wealth dynamics work in the long term are convincing, but, on simple interpretation, it isn't obvious how Bill Gates fits into the picture (other than as an outlier).
- credit_guy 8y agoHere's a few things that produce such a phenomenon, pretty much universally: 1. Everyone alive has a lot of ancestors who lived 600 years ago. Let's say there are about 4 generations per century, so 24 in 600 years. In the extreme you could find about 2^24 = 16 million ancestors from those times. In reality there's some recombination, but you could easily have tens of thousands of (24 times grand)-parents. Some of those were beggars, some were princes. 2. Some societies had mechanisms to preserve wealth concentration within "the family", such as primogeniture [1]. With this arrangement, the majority of the wealth of a family was transferred to only one descended. The outcome was that if you were rich, a few generations down the line one single descendant would be rich, and pretty much all your others will be poor. Just look at Prince Charles in the UK who will one day inherit the crown, and Prince Harry who will be a nobody. Sure, they both have royal weddings, and people follow their various affairs in tabloids, but at the end of the day, Harry's grandsons will have inherited from their queen grand-grand-grand-grand-mother something around zilch compared to one of Charles's grand-sons who will be king. [1] https://en.wikipedia.org/wiki/Primogeniture https://en.wikipedia.org/wiki/Primogeniture
- iguy 8y agoThese points are true. And note that 2^24 is larger than the population of Italy at that time. But you should be extremely cautious about presuming that these 2^24-minus-duplications ancestors were anything like uniformly distributed. Top-10% Florentines today may easily have a majority of their descent from top-10% ones 600 years ago. Because the rich had more kids, in a time of very slow overall population growth.
- credit_guy 8y agoWell, my guess is that 100% of the Florentines today have easily a majority of their ancestors in the top 10% of the Florentines 600 years ago. Survival of the fittest and stuff ...
- iguy 8y ago
- benj111 8y agoSo inheritance tax?. Or is there an argument that this is good for society?
- netcan 8y agoWhy inheritance, why not just a wealth tax? The problem with wealth, company any capex taxes has tended to be dynamic effects like capital flight. But, those aside, a 1% effective wealth tax on paoer/whiteboard, basically neutralises picketty's r>g, the driving force behind wealth disparities. ^ edit: in that theory
- benj111 8y agoI suppose ideologically a wealth tax presupposes that all wealth is bad, whereas an inheritance tax just targets unearned wealth. How would a wealth tax differ from a capital gains tax? The net effect would seem to be similar?
- losvedir 8y ago> I suppose ideologically a wealth tax presupposes that all wealth is bad, whereas an inheritance tax just targets unearned wealth. I don't agree with that framing, but even so if you look at the debate about income inequality today, you'll see people have issues even with earned wealth, in astronomical amounts (eg Bezos, Gates, Koch brothers, etc).
- benj111 8y ago"The Koch brothers are the sons of Fred C. Koch, who founded Koch Industries, the second-largest privately held company in the United States" wikipedia "His [Bill Gates] father was a prominent lawyer, and his mother served on the board of directors for First Interstate BancSystem and the United Way. Gates' maternal grandfather was J.W. Maxwell, a national bank president." Also wikipedia. So these aren't exactly people who worked their way up from the gutter. But yes some people probably do have problems with earned income, I still think the distinction is worth it though.
- huffmsa 8y agoA few quibbles. 1. Wealth != Taxable income. Wealth is generally post tax holdings. It's technical, but important to distinguish. 2. This isn't too strange for Europe. The aristocracies that stratified during the enlightenment did pretty well in places where there weren't proletariat revolutions in the 19th century. The northern Italian city states have always been odd, autonomous ducks.
- ataturk 8y agoIt may not be strange for Europe, but don't you find it problematic that the few families that ruled the world in the Middle Ages still rule the world today? How is that even possible? It's frankly disgusting and speaks to how wealth and power concentrate and then never go away. The French and the Russians were right. Too bad what came after was so horrific in those cases. We have the same problem in the states--so-called "Old Money" mixing with all the "New Money" lording over the rest of us. We also have politicians who are far past their expiration dates. Long live ANARCHY.
- bpicolo 8y agoThat said, it's taxable on death, typically. Italian inheritance tax looks to be pretty low though (sub-10%). That's miniscule.
- deleted 8y ago[deleted]
- wil421 8y agoOne thing I learned in Florence is when the plague came the rich families from Siena and Florence took two different approaches. In Florence, some of the families noticed they might not last so they decided to, not sure if distribute wealth is the right word, but they gave a lot to the city and remaining people. They knew it would be needed for rebuilding. Siena did not and according to my guide it’s the reason Florence flourished and Siena became a lesser known city.
- JohnJamesRambo 8y agoThat's fascinating, thanks for sharing it.
- partiallypro 8y agoI have my sincerest doubts this is why Florence flourish and Siena did not. It likely has a lot more to do with trade routes and the Arno river.
- wil421 8y agoThere are many reasons Florence flourished. Another reason Sienna didn’t is because people stopped doing pilgrimages to Jerusalem. Siena relied on these pilgrims and one big thing the banks did was exchange various currencies.
- alehul 8y agoRecommended sources on this? I'd be interested to read a book or article or anything on this period of history :)
- oh_sigh 8y agoA big reason was Spain united with Florence and together took out Siena. If the Italian War went the other way, Siena would have been ascendant and Florence just a subdued duchy.
- learn_more 8y ago"When regressing the pseudo-descendant’s earnings on pseudo-ancestor’s earnings, the results are surprising: the long-run earnings elasticity is positive, statistically significant, and equals about 0.04. 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)." So if your family was rich then, you probably make 5% more than than most people now. Nothing much to see here.
- ForHackernews 8y agoOver 600 years, that's still a surprising result!
- schnevets 8y agoI'm so grateful for the parent commenter who looked at the VoxEU source, because it helped put things into perspective. A 5% earning increase isn't too surprising, given that the land claims and other investments are still respected today. It's a bit like Fry's bank account on that early Futurama episode. Those 600 years were a battle between compounding interest and regional turmoil/uncertainty. It's pretty cool that the holdings still have a legacy while not stifling all social mobility.
- goofingaround 8y agoWhy do you think so? Given the magnitude of the result, the mechanism might be genetics rather than social immobility.
- femiagbabiaka 8y agoHow could someone be genetically predisposed to make more money?
- brixon 8y agoIt's been nurtured so long that it feels like nature.
- DennisP 8y agoA while back I was reading a stack of financial books, and in one of them the author (I think it was William Bernstein) wrote that he'd had the opportunity to interview a member of one of these families, and asked how they'd managed to hold onto their wealth for 600+ years. The answer was "art, gold, and land." If you had a rich estate back then and a foreign army was on the way, you could roll up your art, put your gold in sacks, and ride away. The title to the land would still be yours, and after the foreign army is expelled you just return home with your stuff. I can think of some risks with this plan, and some improvements that could be made today, but basically these people aren't chasing returns, they think about preserving wealth for the long haul through worst-case scenarios.
- Tade0 8y agoThis idea ultimately didn't work in eastern Europe. My family used to own some land but after WW2 it became Soviet territory and was lost. We received some compensation eventually, but it was a pittance comparing to the original value.
- twooclock 8y agoLuckily at least you're alive. In my country whole social class was wiped out after ww2.
- zokier 8y ago> After World War II, Czechoslovakia, the predecessor of the Czech Republic and Slovakia, acting to seize what they considered to be German possessions, expropriated the entirety of the Liechtenstein dynasty's hereditary lands and possessions in Bohemia, Moravia, and Silesia which compose the Czech Republic. The expropriations (which were the subject of an unsuccessful court case brought by Liechtenstein in the German courts and the International Court of Justice) included over 1,600 km² (which is ten times the size of Liechtenstein) of agricultural and forest land mostly in Moravia, also including several family castles and palaces. Yup.
- Spooky23 8y ago
- throwaway5393 8y agoThis makes me wonder which "stable" country currently has the least amount of generational wealth. I would assume China, due to the Cultural Revolution. From what I recall, all of their billionaires are currently first generation. But we will see as time goes on. Or maybe South Korea since they were were colonized for a long time and suffered through a recentish, direct war.
- dorfsmay 8y agoFrom the article: "It’s a trait shared by elite families in China, whose high status has persisted since the Mao years." https://qz.com/314720/heres-the-surprising-social-trait-that-the-english-and-chinese-have-in-common/ https://qz.com/314720/heres-the-surprising-social-trait-that...
- throwaway5393 8y agoThanks for the article! This is fascinating and I will look into their paper more, but on a quick glance, I wonder about their methodology here: > The authors identified 13 surnames that appear with unusual frequency in the Qin examination system—the Chinese test to identify who will become a member of the highest elite in the country, the state bureaucracy. They selected them from more than 50,000 successful candidates (the most successful) in the Yuan, Ming, and Qin dynasties, starting in 221 BCE (we are talking China). These surnames are overrepresented in the modern imperial era and in modern Chinese elites—the high officials in the Nationalist government from 1912 to the triumph of the communists in 1949; professors at the ten most prestigious universities in the country in 2012; chairs of the boards of companies listed in 2006 as having assets of $1.5 million and above; and members of the (still communist) central government administration in 2010. It is my understanding that while the Chinese do have a variety of surnames, they are often based on region. Not to mention, the 3 surnames "Wang, Li, and Zhang" are attributed to almost 30% of Chinese people.
- bjourne 8y agoIsrael is a strong candidate given that the country didn't exist before 1948. Essentially the country was reset to zero as all Arab wealth was confiscated and nationalized during the formative years in the 1950's.
- kensai 8y agoThe original paper. https://www.bancaditalia.it/pubblicazioni/temi-discussione/2016/2016-1060/index.html https://www.bancaditalia.it/pubblicazioni/temi-discussione/2...
- wand3r 8y ago$100 dollars in principal with a $1 annual contribution @7% interest is >$28 Billion invested now. Still surprising between war, revolution or poor financial management the fortune didn’t erode.
- AnimalMuppet 8y agoMaintaining 7% interest over 600 years might not be easy...
- mrfusion 8y agoI’m confused. Any family from the 1400s would have millions of descendants by now.
- gwerww 8y agoTo a first approximation, yes. But it breaks apart quite quickly -> otherwise we'd the world pop would be much higher. thought experiment, if every rich family in Flrnc had a million decedents, and there were (at least) a thousand families in Italy, then there would be a billion ppl in Italy today. What happens? Well first high child mortality, or death before reproduction. Then you send most of your daughters off to the nunnery. Your youngest son becomes the family priest. You marry within the group (actually not that dangerous, genetically). End result? The numbers stay low. Still many of us are probably related to these rich families. For example, otherwise normal, boss is related to the Eastern European royalty... through a courtesan. He didn't get squat from them (although he ironically ended up with their name by sheer coincidence).
- lalaithion 8y agoYour thought experiment assumes that each person today is a descendant of only one family.
- rhacker 8y agoI'm actually still confused why people have more than 2 children at all. Where 2 would be a decline in population, for the most part.
- kerng 8y agoThere is a great book that I read a while ago (fiction) which this article reminded me of. Called a trillion dollars: https://www.goodreads.com/book/show/22710315-one-trillion-dollars https://www.goodreads.com/book/show/22710315-one-trillion-do...
- gwbas1c 8y agoThe question I'd like to see answered: Does the wealth come purely as a result of circumstance, or do the families have genetic traits that make their descendants better at accumulating / retaining wealth?
- MrXOR 8y agoRest in peace Karl Marx!
- JohnFen 8y agoThat isn't surprising. It's much, much easier to gain and keep wealth when you already have a lot of wealth (that's the flip side of the fact that it's very expensive to be poor).
- 8bitsrule 8y agoI'd surmise that over 591 years (short of an exhaustive study) many 'rich' families have -not- remained rich. I'm not sure what 'rich' means; who's in a position (or even can be) to know who was objectively 'richest' then; and centuries have a tendency to erase many or most fine details, and to embroider others.
- ryanmarsh 8y agoWhen you research the mega rich across time, up until the 21st century, you learn a lot of weird things. Some are things most people would call “conspiracy theories”. Some are things you would expect but can’t imagine actually happening (like closely protecting blood lines). If you want to read some weird mega-rich stuff do some digging on the “red shield” family, their financial relationship with a particular large church, the sinking of the titanic, and read “The Secrets of the Federal Reserve” by Eustace Mullins (the benefactor for much of his research was Ezra Pound).
- crushcrashcrush 8y agoThis is a great example of why we need an inheritance tax.
- randyrand 8y agoI feel like we need more information before we can conclude that. Why is it assumed that this isn't a sign of the families doing a good job raising children, etc?
- deleted 8y ago[deleted]
- carusooneliner 8y agoNassim Taleb uses the Florence example to make the argument that Europe has more economic inequality compared to the US. He makes an interesting point that static measures of inequality like 'top 1% of population have xx% of the wealth' aren't that useful, a better indicator would be a dynamic measure that shows economic mobility, people going both up (new money) and down the ladder (bankruptcy). It looks like in Florence, families that climbed the ladder centuries ago never came down. Taleb's essay on inequality: https://medium.com/incerto/inequality-and-skin-in-the-game-d8f00bc0cb46 https://medium.com/incerto/inequality-and-skin-in-the-game-d...
- maerF0x0 8y agoI see nothing wrong with a previously "wealthy" family remaining in the "wealthy" category. To me the real need is rising tides raising All ships (and maybe that the lowest ships are rising at faster relative rates than the highest ships). Whereas the poor maybe used to only have (completely guessing here) basic food, grade 6 education and didnt have any printed materials, now the poor have excess calories, state mandated 12 years education and access to the internet. on the political side, IMO dividing people is just a tactic to conquer them, so watch out for those who would turn us against eachother.