Today's rich families in Florence were rich 700 years ago | Hacker News Reader

Today's rich families in Florence were rich 700 years ago

vox.com

202 pointselberto34103 comments

I'm not entirely surprised. In Florence, and probably in lots of other places too, wealth was amassed in land holdings and gold (florins being the currency). Land holdings over a 700 year horizon seems like a far better stability bet than equities, since the land itself has intrinsic value even if the occasional war or natural disaster gets rid of whatever is happening on it. Back in the 1400's, the merchant class absolutely made a great living - upper class even. But the old blue bloods (many families of which even went broke, in terms of liquidity) and nobility had land. They used that land to build business and bring in rents, and build business relationships with other upper class families, but even as the businesses faded the land remained. I mentioned some of the old Florentine nobility going broke - many of them preferred hardship to selling their land holdings. Some of them would eventually marry off a daughter to a family that desired the blue blood relationship and some land would go as dowry, thus restoring the fortune in that family (through the wealth of the inlaws). One good example is Lisa Gherardini's marriage into the del Giocondo family - she was of an old nobility fallen on harder times, while the Giocondo family were new money merchants. Some land and a few florins went with her, the Gherardini family were restored a bit and the Giocondo family remained wealthy for a long time.

I'm not a historian, but I've taken a bit of an interest in Florentine history as an adult, so take this for what it's worth. A real historian would probably know better.

Bali is a similar case. A bunch of rice farmers with vast ancestral lands, some families owning multiple square miles.

And when a new town or school is built nearby, they suddenly own 1,000 rental apartments. Dad goes from rice farming to collecting rents full-time.

Seems land taxation + basic income would be a great combo to spread wealth around.

I happen to think that if you want to maximize human potential across the board, you need to take away the threats to existence at the individual level - meaning a place to live, food, healthcare, education. If your basic needs are met, theoretically, you're free to explore and innovate (or sit on your ass, but I think the propensity for that is overblown). That's not just to help poor people either, that could boost your middle class output as well - use me for an example, I'm educated, relatively advanced in my career for my age, but I'd probably be doing something different if I didn't have to worry about student loans to repay and a roof over my family's head. Maybe that something different would be more impactful, maybe it wouldn't, but it'd be different. I digress. I really hope to see UBI attempted somewhere to see if it works.

We do already tax land in most (all?) of the developed world. I honestly have no idea of the tax structure on land in 15th century Florence, but I'm inclined to check that out after work today.

Of course, goals vary across humans. Advancing the whole at the relative expense of another makes the people who are already ahead a bit nervous. That's not wrong, either, it's just human nature. Advance the baseline far enough and it begins to matter less.

AFAIK, we have tax on property. We tax the land plus the value added to the land by building on it. IMH, we shouldn't tax the construction since that is disincentive for economic activity. But the land? Some land just becomes valuable because it is near other valuable properties.

Georgism gets a lot of support on HN, but how exactly would the unimproved value of land be determined? Similar to the appraisal system we have in place for houses, or something different?

It is definitely an interesting problem. Perhaps a function based on the travel distance from where the rest of the people are living or working ? Sort of like page rank.

So land in Detroit and San Francisco, which have similar populations, should be valued about the same. (Yes, there are probably more people in the Bay area overall, but to a first approximation.) And coastal property on the southern Maine coast should have a low value.

Ultimately, it's market value. You can subtract the value of the building but it's actually hard to separate the two.

Well San Francisco is on the coast. By sea, it has shorter travel times to all the cities in the West Coast, Vancouver and a continent called Asia.

Instead of distance to people, how about distance to people times dollars?

I think you would have to take the current market value of the land, then subtract an estimate of what it would cost to re-do the improvements at today's prices. The insured value of structures may be an easy way to get at that estimate.

For instance, a lot with a house on it that costs $250k, when the structure would cost $180k to reconstruct from scratch, implies that an adjacent empty lot of the same size would be $70k. But that's not entirely unimproved. There still may be water, power, telecoms, and sewer utility hookups, which certainly qualify as improvements. So you estimate the cost to re-wire/re-pipe the entire neighborhood from the utility, and divide that across all the lots, weighted by area. And being close to a road is an improvement...

Professional appraisers would most likely just make a plausible-sounding number up, and collude with one another to ensure consistency over an entire county. It's the easy way.

The idea of land value tax is to create value by building on that land. Decreasing the tax when there is nothing on the land goes against that.

Just as an FYI: https://en.wikipedia.org/wiki/Bid_rent_theory

> If your basic needs are met, theoretically, you're free to explore and innovate (or sit on your ass, but I think the propensity for that is overblown).

It's a necessary, but not a sufficient condition. You also need world class free education, and a networking system that tries to bring the most inventive people together.

I'm not sure if the propensity for empty hedonism is overblown or not. It's hard to imagine what would happen in a system with open economic freedom and self-determination, because it's never been attempted before.

I've seen estimates that maybe only 10% of the population is even remotely innovative. A lot of people seem to want to have someone telling them what to do with their time.

But is that because of the emotional scarring left by an economically abusive upbringing, or is it innate?

No one knows.

I am sort of reaching that conclusion myself too.

We are better and better on manufacturing. I don't know how much efficiency is left to extract. And human labor is becoming less and less valuable as we are better on automating.

Real Estate(housing and commercial), education and health are still very expensive.

A tax on land would reduce real estate costs and help pay for basic income. But politically will be really, really hard to do.

It makes more sense to try to grow the GDP and tax income instead. Taxing land in order to specifically target people with inherited land holdings has all sorts of unintended (or maybe intended) consequences because these people often do not have sufficient liquid holdings to pay the taxes. They end up having to sell off land in parcels which is an arduous and incredibly inefficient way for a government to raise revenues to 'spread wealth' and land in these cases often isn't easily parceled. Should a family sell their estate, the farmland that produces revenue that sustains the estate, or the useless swamp to cover the taxes? This isn't the sort of situation governments should be encouraging. If you have no mercy for that family, consider people whose parents buy a small plot of land that unexpectedly becomes very valuable and then the children are forced to sell the house on the death of their parents. Or the same family who finds their tax rate going up but their income staying the same because their land is suddenly in a trendy area. Taxing income to me seems like the most fair way to raise revenue because it targets liquid means.

I fail to see why, if they aren't using the land productively, they shouldn't sell to someone who will. I don't understand why I should feel bad for the family whose small plot of land becomes very valuable so they make lots of money. How terrible!

The only thing worse than a wealthy person sitting on a vast horde of cash is a land-rich person sitting on vast tracts of highly desirable land. If somebody owned several acres in the heart of Manhattan and chose to leave them in the form of undeveloped, fallow fields, why should we not charge them high taxes in order to force them to either develop the land or sell it off to somebody who will?

Land is one of the rare cases where the needs of the many trump the rights of the few.

So what if we apply that rule to poor and middle income people? Are you suddenly interested in taxing those people to get them out so that someone with more cash can do something better with their land? What about people with just enough land to have an unsustainable tax rate but not enough land for it to be immediately useful for development? People with older homes in cities fall into this category frequently. How much revenue is this worth for the government after land is sold and properties destroyed to make way for new versus if they had just raised tax on income? This assumes there is even a willing buyer.

>People with older homes in cities fall into this category frequently.

Would this not be a good example of just the sort of thing that would be fixed by this tax?

There are many people in places like San Francisco and Manhattan that are holding on to single family homes. This reduces the amount of housing that is available and increases rents. It seems fairly reasonable that these people should pay for the enormous resource usage.

I don't see how a tax resolves that situation, if the situation indeed needs resolving. The tax could just as well cause a large apartment with many renters to be unsustainable and become replaced with a smaller apartment with very high rents to cover the cost. If land can be used to build an apartment, that is one issue, but another issue is using a tax policy to try to change its ownership or purpose. I am more strongly opposed to the latter.

Raising tax on income is regressive by its very nature. The wealthiest people in our society pay almost no income tax at all and raising it would not affect them.

If an old couple is barely scraping by on a pension but sitting on a property worth millions that could be converted to an apartment housing hundreds of people, why shouldn't they be encouraged to sell or at the very least rent? In their present state they are a net drain on society, paying no income taxes and squeezing everybody else into less available land.

Land value taxes[0] are the answer to this mess.

[0] http://www.economist.com/blogs/freeexchange/2015/04/land-val...

If every person has the right to defend even by force — his person, his liberty, and his property, then it follows that a group of men have the right to organize and support a common force to protect these rights constantly. Thus the principle of collective right — its reason for existing, its lawfulness — is based on individual right. And the common force that protects this collective right cannot logically have any other purpose or any other mission than that for which it acts as a substitute. Thus, since an individual cannot lawfully use force against the person, liberty, or property of another individual, then the common force — for the same reason — cannot lawfully be used to destroy the person, liberty, or property of individuals or groups.

Such a perversion of force would be, in both cases, contrary to our premise. Force has been given to us to defend our own individual rights. Who will dare to say that force has been given to us to destroy the equal rights of our brothers? Since no individual acting separately can lawfully use force to destroy the rights of others, does it not logically follow that the same principle also applies to the common force that is nothing more than the organized combination of the individual forces?[1]

[1]: http://bastiat.org/en/the_law.html#SECTION_G008

The right to defend one's person is not strictly a defensive right - without food, water, and shelter a person's body will get sick and die. Therefore, defense of the body carries the possibility of necessity for aggression, particularly against the property of others.

In view of this, the idea of placing one's property rights on the same level as the rights of the person of another is flawed. If one person is starving and another owns far more food than he could eat in a lifetime yet refuses to part with it I see no problem with the starving man using force to obtain his daily bread.

> people often do not have sufficient liquid holdings to pay the taxes.

This is the "death tax" argument and has been debunked over and over. When they tried to find one of those, as the story goes, "farmers who lost their family farm", they couldn't actually find one.

If this is a genuine concern, then personal holdings of property should have capped tax increases until they transact. At point of transaction (inheritance generally), the assessment jumps to match the market.

As for corporate holding of property, it should get no such consideration. If you can't pay the tax, you transact the property. California is having a massive problem with the fact that a bunch of really expensive real estate in places like Silicon Valley have subleases that are 20+ layers deep to avoid triggering a reassessment.

That isn't true. Great article about the death tax here[1]. Also, have a look at these famous auctions[2]. Some were brought on by things other than taxes but death duties that Labour increased in the 1940s were definitely a precipitant. But these taxes are far reaching. From [1] it even says the death duties earn less than booze or tobacco, or vehicle duties.

I can't speak to corporate holdings of property, I am specifically talking about property held for generations in families. My general points are that it is a)inefficient and strange to target certain people that inherited and b) when you do target them, there are unintended consequences.

[1]http://www.telegraph.co.uk/news/politics/georgeosborne/11907... [2]https://en.wikipedia.org/wiki/British_country_house_contents...

As your article mentions, the problem is that the rich have a loophole because the property isn't taxed properly when transacted.

The point isn't to make "inheritance" the taxation point, it's to make "transaction" the taxation point.

In addition, I think that "inheritance tax" executes differently in the US than the UK.

I wasn't quite sure what you meant originally but I see it now and completely agree with taxes on transactions and perhaps removing those loopholes.

So exempt primary residences from large tax hikes. The original promise of Prop 13 was to protect grandma from having to sell her home due to rising property values. But there have been some pretty bad side effects and a lot of the benefits are going to the commercial property owners and wealthy individuals and landlords.

But the original promise actually to protect people with larger property holdings like apartment complexes and condominium complexes.

This could have been solved by square footage or price floors. If grandma lives in a mansion, maybe she should be paying her share :)

"Land taxation" is called property tax and it already exists everywhere. For most people it is the largest tax bill they pay, it pays for schools and roads and local government.

Property tax is common, land value taxes muss less so. Although arguably they're much better in many ways (assuming regulation isn't otherwise broken in regards to zoning for example).

Read Piketty's Capital; there's a great discussion about how wealth has been held across several capitalist countries for the past 200-300 years.

What's striking is that the value of agricultural land in the US around 1700-1800 was, if memory served, something like 50% of aggregate US wealth, whereas today it's <1%, with the dominant portion being residential real estate and business equity (which includes commercial RE, I think). According to the book, US wealth is about 50/50 between those two categories.

Which is all to say, land hasn't been that great of a bet growth-wise for the past 100 or so years in the US. I don't know how one would've fared over 700 years of Italian history, though.

More broadly, I think the biggest determinant of wealth is one's attitude toward generation of income. In a capitalist economy, long-term wealth is generated by the acquisition, improvement, and operation of assets; it's the same deal whether you're a business owner/founder, investment banker doing leveraged buyouts, landlord, miner, whatever. Get assets (build/buy), work on them, then use them for income or sell them to buy other/more assets. Very different attitude toward income than "Get a job". I wonder how correlated attitude is with wealth?

I'm curious how much of the agricultural land then is the residential land today.

Fascinating: income mobility in one generation (PARENT -> CHILD) cannot be extrapolated to multiple generations (PARENT -> CHILD -> CHILD ...), because socioeconomic status persists across generations even if income fluctuates from one generation to the next.

The example given in the OP is telling: "It's not unusual for the child of an economically successful professional to attend an elite educational institution and then move into an artistic or academic or nonprofit career or political career that might still involve traveling in elite circles but at a much lower salary level than his father's. If the professional's grandson then also attended an elite college and moved into a high-paying career in business and law, statistics would show a great deal of economic mobility while common sense would indicate three generations' worth of a high-status family."

And it's not just Florence. The article mentions another study in Sweden that reached similar conclusions.

I wonder how the US compares to European cities/countries.

> because socioeconomic status persists across generations even if income fluctuates from one generation to the next.

Or it could be regression to the mean?

Only if you define "mean" as "this family is upper class on average, and that family is lower class on average" - which I think is a pretty funny definition of a mean to regress to.

Nothing funny about it. Genetic differences drive a lot of inter-personal differences; combine that with assortative mating, and that'll explain some of this intergenerational stickiness in a way that landholdings cannot.

Well, if you distilled that into a quantitative experiment then you would be famous. I don't think that chain of reasoning has any scientific basis (yet?).

There is plenty of scientific basis. Twin & family studies have long examined the topic of heritability as well as the genetic overlap for traits key to SES. However, even though they are correct, I know they won't impress anyone, so how about these recent genomics studies which take a more direct brute-force approach to establishing what has long been known:

"Molecular genetic contributions to socioeconomic status and intelligence" http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4051988/

"Education, socioeconomic status, and intelligence are commonly used as predictors of health outcomes, social environment, and mortality. Education and socioeconomic status are typically viewed as environmental variables although both correlate with intelligence, which has a substantial genetic basis. Using data from 6815 unrelated subjects from the Generation Scotland study, we examined the genetic contributions to these variables and their genetic correlations. Subjects underwent genome-wide testing for common single nucleotide polymorphisms (SNPs). DNA-derived heritability estimates and genetic correlations were calculated using the ‘Genome-wide Complex Trait Analyses’ (GCTA) procedures. 21% of the variation in education, 18% of the variation in socioeconomic status, and 29% of the variation in general cognitive ability was explained by variation in common SNPs (SEs ~ 5%). The SNP-based genetic correlations of education and socioeconomic status with general intelligence were 0.95 (SE 0.13) and 0.26 (0.16), respectively. There are genetic contributions to intelligence and education with near-complete overlap between common additive SNP effects on these traits (genetic correlation ~ 1). Genetic influences on socioeconomic status are also associated with the genetic foundations of intelligence. The results are also compatible with substantial environmental contributions to socioeconomic status."

"Molecular genetic contributions to social deprivation and household income in UK Biobank (n = 112,151)" http://biorxiv.org/content/early/2016/03/09/043000

"Individuals with lower socio-economic status (SES) are at increased risk of physical and mental illnesses and tend to die at an earlier age [1-3]. Explanations for the association between SES and health typically focus on factors that are environmental in origin [4]. However, common single nucleotide polymorphisms (SNPs) have been found collectively to explain around 18% (SE = 5%) of the phenotypic variance of an area-based social deprivation measure of SES [5]. Molecular genetic studies have also shown that physical and psychiatric diseases are at least partly heritable [6]. It is possible, therefore, that phenotypic associations between SES and health arise partly due to a shared genetic etiology. We conducted a genome-wide association study (GWAS) on social deprivation and on household income using the 112,151 participants of UK Biobank. We find that common SNPs explain 21% (SE = 0.5%) of the variation in social deprivation and 11% (SE = 0.7%) in household income. Two independent SNPs attained genome-wide significance for household income, rs187848990 on chromosome 2, and rs8100891 on chromosome 19. Genes in the regions of these SNPs have been associated with intellectual disabilities, schizophrenia, and synaptic plasticity. Extensive genetic correlations were found between both measures of socioeconomic status and illnesses, anthropometric variables, psychiatric disorders, and cognitive ability. These findings show that some SNPs associated with SES are involved in the brain and central nervous system. The genetic associations with SES are probably mediated via other partly-heritable variables, including cognitive ability, education, personality, and health."

Genes don't stop at the neck, nor the pocketbook.

The question is not, is any of the persistence documented across so many times and places genetic? Because the answer is yes. The question is, how much is non-genetic?

yeah that's evidence for genetic factors. The other major part of what you said is assortative mating. You suggest that these two things positively interact to cause a long lived systemic economic outcome. Its the whole package that will make you famous if you could truly demonstrate it.

However, it suggests the 'elite' have ended up in their superior position via a eugenic advantage, so it would also cause massive controversy, and last time this was seriously brought up we had WWII and a genocide.

> The other major part of what you said is assortative mating.

Assortative mating is extremely well documented and not disputed. (In fact, it's one of the most commonly employed ways of trying to debunk twin/family studies as producing wildly inflated estimate.)

> Its the whole package that will make you famous if you could truly demonstrate it.

I don't know what more you could possibly ask for. Family lineages have demonstrated overperformance since at least Galton's genealogies. The social mobility studies suggest it over many centuries. The twin and family studies show that SES is heritable. The GCTA methods which remove the assumptions of twin studies also show SES is heritable. The GWASes not just show that it's heritable, but give specific SNP hits! The package has been demonstrated. People just don't want to hear it.

> so it would also cause massive controversy

You'll note you didn't see any headlines or pop science articles on these papers.

> last time this was seriously brought up we had WWII and a genocide.

Eugenics may have been a pretext, but it certainly did not cause WWII or even the Holocaust, which can be traced to geopolitical factors (like the Versailles treaty...) and the long-standing virulent anti-semitism in the region, among many other factors.

Yeah your right, there is loads of literature on it. Now I am internally confused what the ethical consequence of that is. What should happen in policy? Should we mess with the societal bio machine? Is it a good thing, or a bad thing. What are we trying to achieve?

I would say the implications are simple: first, acknowledge this reality and stop scientists from constantly making policy pronouncements like 'education correlates with increased longevity, let's make everyone go to school longer' which do not control the large known universal confounds of genetics and produce a large body of futile programs and bogus 'science'; second, push forward genetic engineering as fast as possible.

Just as no one deserves to be born poor or born with a horrible genetic disease like Tay-Sachs, no one deserves to be born with a bum set of intelligence or SES-reducing variants either. The injustices and inequities of modern society remain outrageous, whether or not they stem from 'poverty traps' or SNPs. Everyone should have an equal chance; we will know we are moving towards a better society when shared-environments and heritability approach 0, and it's all error.

Yglesias has written about this before. Class is about a lot more than your income in any given year.

http://www.vox.com/2015/5/12/8592689/income-class

Probably the most succinct illustration of the difference between human capital, capital (traditionally known as wealth), and income that the vast majority of the American public confuse all the time and like to use interchangeably.

"Fascinating: income mobility in one generation (PARENT -> CHILD) cannot be extrapolated to multiple generations (PARENT -> CHILD -> CHILD ...), because socioeconomic status persists across generations even if income fluctuates from one generation to the next."

Right - which means that no matter how much you earn you can't ever "phase transition" unless you migrate from earnings to holdings.

No matter how much the child/grandchild/GGchild makes, if they don't parlay that into assets, eventually the bloodline reverts to the mean.

That's not to say that the holders of assets have a cake walk - any cursory study of history shows that these fortunes also dwindle and disappear[1] - but you're getting nowhere at all if you rely on earnings from labor.

[1] They're not renting that big house out to Downton Abby because they like period TV pieces...

The parent comment's theory is not that they hold onto assets, but that they hold onto social ties. A person born into the upper class will have better connections, get a better education, and act dress and speak like a member of his class, and marry into other upper class families.

Ugh. If you look at the sourced article[1] the effect is actually very small:

"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)"

http://voxeu.org/article/what-s-your-surname-intergeneration...

This strikes me as proving an awfully small result too concretely. Across the several thousand ancestors you have going back 600-700 years (if not millions of ancestors; a rather conservative "one generation every 25 years" for 600 years yields 2^24-ish possible ancestors, ~16 million, though most people's family trees do not actually branch that much in the less mobile times of the past), the one from which your patrilineal name comes from is even 5% relevant to your life today? Is this one of those cases where hard science and math prove something very counterintuitive, or one of those cases where soft science and math gets popular because it was poked and prodded until it yields a counter-intuitive result that would get into the news?

My thought was similar: how long ago was the most recent common ancestor of Florentines (barring immigration)?

Thanks for pointing this out and citing the paper. When I saw the Andersson graph I thought, "oh hey, those two roughly Gaussian distributions are indeed a wee bit distinguishable", then I read

> were drastically more likely to be in the Swedish financial elite than people with the surname Andersson.

and I was like, "Drastically? Really?"

Another day another shoddily reported science article.

Two distinguishable Gaussian distributions will have very different behavior in the tails. So if you knew two groups had slightly different means in wealth, then it would not be surprising to discover that at a particular cutoff in the tail, one group will be much overrepresented. Thus if you look at Clark's paper http://faculty.econ.ucdavis.edu/faculty/gclark/papers/Sweden... , you see that while incomes may only be 21% higher for descendants of noble surnames vs a normal surname, "we see that Noble Surnames are about 6 times more likely to be doctors or attorneys, and about 4 times more likely to be graduating an elite university in 1998-2012"; likewise, the mean increase in education is not that big, but the Royal Academy overrepresentation is something like 5x.

That's not small at all. The expected effect size is 0% over so many generations and political upheavals. 5% is ridiculously high for 700 years!

>Today's rich Florentines had rich ancestors

Doesn't everybody alive today have rich ancestors? Like pretty much everyone is related to Charlemagne or Genghis Khan?

https://www.google.com/#q=related+to+charlemagne

http://www.nature.com/news/genghis-khan-s-genetic-legacy-has...

Indeed, because the lower classes tended to die.

Not necessarily; just that classes mix and have always mixed (partly out of wedlock of course).

When you go back, say, twelve generations, almost everyone has a few upper class ancestors among the 8190 (part of them are anyway overlapping duplicates).

(FWIW, I have an ancestor 12 generations ago who was almost a nobleman, plundering Germany in 30 Years War and getting in return an estate that was tax-free for some generations, as long as the owner promised to send in a cavalryman to the Swedish king's service. But most of my ancestors were dirt-poor peasants like almost everyone was.)

My (with no evidence mind) intuition always suggested to me that there is some Group Selection going on in evolutionary terms. It could be on the memetic level.

I am aware the Selfish Gene debunked this. Yet the way different classes of humans relate to each other, again and again the same coincidences. There's something going on but I don't know what it is.

In my country there were originally two major tribal alliances literally going back thousands of years. Today the people in the two major political parties are descended largely from those two tribes. Also largely these are disjoint sets.

If there was some crossover it could be just natural selection in the way we're all related to Genghis Khan but that there are no descendants of Tribe X in Party Y suggests something else is up.

I found this quite interesting:

> We also find two further interesting pieces of evidence. First, we show that intergenerational mobility in the 15th century was much lower than at present – the intergenerational earnings elasticity between two successive generations was estimated to be between 0.8 and 0.9, thus depicting a quasi-immobile society in 1427. It is plausible, though we do not have direct evidence for this, that earning elasticity was close to 1 until the 20th century (before the Italian industrial revolution and mass schooling) and lower in the subsequent period. This may explain why we still find some degree of inheritance of socioeconomic status after six centuries.

So Yglesias, playing the "debunked!" card[0], says "look--here is proof that our estimates of intergenerational income mobility are TOTALLY WRONG!" In fact, there's a good chance that current studies (showing high mobility) are perfectly consistent with this paper, since it found that moblity rose dramatically since the beginning of the studied period.

[0] http://slatestarcodex.com/2014/12/13/debunked-and-well-refut...

Yglesias consistently strikes me as someone who was told they were very clever far more than was actually warranted.

> A lot has changed in the Italian city of Florence in the roughly 700 years since the 1427 census

The author must have been using some really bad floating point math, there.

He even mentions "700 years" and "seven centuries" multiple times... Did he actually mix up "not quite 600" with "roughly 700"? Or did the census of 1427 happen... not in 1427?

Doesn't everyone round time periods to the nearest multiple of 350 years?

I suspect that since the 9th century CE was 1200 years ago, he added an extra hundred years in the wrong direction when thinking about the 15th century (i.e., he thought 1427 was in the 14th century, which is seven centuries before the 21st century).

1. 15th century (1427)

2. 16th

3. 17th

4. 18th

5. 19th

6. 20th

7. 21st (now)

That makes about as much sense as counting the 4 months of November to February as 2 years because it exists in 2 calendar years.

It can be an explanation of the error without being a defense of it.

If you're going to add theories about why, let's add some more.

1) Last names matter. If you have a name associated with success, you get more chances, which results in more opportunities and a better chance of success.

2) Genetics matter. A person whose parents were unsuccessful but whose background includes genetics for intelligence and beauty will tend to have an innate advantage.

3) Family stories matter. People who know their ancestors did amazing things sometimes try to live up to the family reputation with good results.

You can get a large inequality effect just from differences in inheritance between children. If we call the child who gets the bulk of the inheritance the "first child", then the first child of the first child, etc., will end up being very wealthy.

You can see it in a very simple model:

1. start with a fixed size population, each starting with the same amount of wealth

2. pair the members of the population randomly to form two "parents"

3. combine the wealth of the two "parents"

4. split the wealth into two unequal parts with some fixed ratio (say 3:1)

5. assign the two parts to two "children" of the "parents", resulting in a population of the same size as the original

If you repeat the above procedure (from step 2) for only 5 or 6 generations then you get a distribution that is positively skewed, to a degree depending on the ratio (3:1 gives quite a large skew). It is a simple model, and I have only evaluated it numerically, but it shows how strong an effect you can get from only a single process (differential inheritance in this case). I am fairly certain that things like assortative mating would produce similar (compounding) effects.

So I just did an experiment with simple assortative mating, where the population is drawn into an ordered list, with the probability of selection being proportional to wealth, and then paired off according to their order in the resulting list (so the wealthy are more likely to mate with each other). The results surprised me somewhat, though as with most things are somewhat obvious in retrospect.

If you take a (model) world with unbiased inheritance (a 1:1 split between the two children), then no "mating strategy" is able to increase wealth inequality - at worst it can keep it the same as it was. This can be seen by noting that neither of the children of the two wealthiest members of the population can have more than the wealthiest of their two parents. Over many generations, unless the mating selection is extremely carefully chosen, the wealth distribution will collapse to perfect equality, for any mating strategy.

Assortative mating therefore can at worst exert a drag on the (natural) restoration to equality. In a (model) world with biased inheritance this leads to greater amounts of wealth inequality, because the expansion of inequality through the unequal inheritance is "resisted" less by the reduction in inequality caused by mating.

In conclusion: try and treat your kids the same if you want a more equal world!

>relatively low 0.2 percent elasticity of income in the Nordic countries and a relatively high 0.5 percent elasticity of income in places like the UK, the US, and Italy. An elasticity of 1 would mean that income status is perfectly inherited between father and son, whereas an elasticity of 0 would mean no inheritance.

I assume the author means 20% and 50%, respectively? If "1 percent" is all of it and "0 percent" is none of it then I assume he confused percentages with probabilities.

Wouldn't you say that 50/100 = 0.5?

Yes, but expressed as a percentage, that's 50%. As in, 50 is 50% of 100.

I would!

However, a "probability of 0.5" and "0.5 percent" are different things by two orders of magnitude. "0.5 percent" is "0.5%" which is 0.5/100, not 50/100.

Verizon ... statistics?

Yes, you are completely right. The author just threw in the word "percent" like the 100x scaling factor between that and decimal probability is nothing.

The discussion of Becker reinforces my belief that the discipline of Economics exists primarily to justify pre existing power structures by using assumptions which are convenient but empirically unfounded.

also, it conveniently explains/justifies PAST events but is useless for predict the future

You are onto something here

So Economics might fit the definition of a modern mythology because the theories are stories told to explain the order of the world. (and because economics is so difficult to tie to real world, controlled experiments...)

A paper by two economists finds evidence that intergenerational wealth effects have persisted over very long periods of time. They note that their results are "new and remarkable" in the context of a large existing body of empirical work studying and estimating historical intergenerational mobility.

If the above reinforces your belief that "economics exists primarily to justify pre existing power structures by using assumptions which are convenient but empirically unfounded," then what exactly would weaken your position?

> the discipline of Economics exists primarily to justify pre existing power structures by using assumptions which are convenient but empirically unfounded.

If you think that's what Economics does, you either have not studied it, or somehow studied it under a unique professor in a unique environment, isolated from reality.

Not to mention that your statement makes no sense at all, since if the power structures are already existing, then by definition, they are empirically founded.

I am skeptical of any study that uses Italian tax records as an empirically sound data source.

Additionally, Yglesias' writeup of the study is short on specifics. What was the number of people with a given surname in 1427, and in 2011? In other words, is it possible that "Family A" was a big, wealthy and powerful family in the 1400's, but today there are only four people with that last name in Firenze and three of them happen to be in high-wage jobs?

Are income figures median, or mean? Neither Valentino nor Vasco Rossi lives in Firenze, but if they did, they'd be skewing the mean income score for the Rossi name.

Are we sure the people today with a given surname are the actual descendants of people in 1427? And, if they are, what do we know about whether the family has stayed wealthy in the years between then and now?

All in all, this article seems more clickbait-y than insightful.

I guess this eco-mobiilty all depends on the social structures and political environments. There is a Chinese proverb "富不過三代", or, fortune won't last three generations. The Chinese genealogy is relatively complete and you can actually trace Confucius' offspring to this date. But you'll be surprised to find big names today rarely also have some big name ancestors 500 years ago. One reason is that the Chinese social and political are constantly changing. In China the longest dynasty Ching lasted 268 yrs. Basically every 70-150 years there is a game-of-thrones type of revolutions going on, and the entire soc-pol systems flopped. Another reason is that a common used punishment by the emperor in the past is collective punishment, i.e. if someone is sentenced to death, all his/her relatives up to three upstream and three downstream, sometimes even all cousins, are also sentenced to death. If someone did escaped they would just change their surnames (and Chinese people change surnames relatively more frequently than we would think.) That's probably why a big-shot in the history book might have no offspring to be found nowadays.

> The truth, however, is that we don't really know what's going on.

Over 14 generations you will get ~ 50k relatives who live today. I bet some of them are not rich.

You're not taking cousin marriage into account--- a lot of those 50k people are the same people. And I'm using the loose definition of "cousin"-- any non-immediate, however distant, family relative.

Anybody curious to know how wealth can be preserved in perpetuity should read up on what John D. Rockerfeller said about it.

Taxation on income is a pittance to where wealthy individuals source majority of their income.

A rich guys 3 kids could virtually pay zero income-tax their whole lives but live princely lives with capital gains, trusts, etc.

This looks like brand longevity - the nobility has great brand name awareness, and as they come under financial threat there are plenty of investors willing to marry in to the name and provide new liquidity.

I doubt all the rich families of 1300 survived but I also doubt that the winners never took outside investment

Yes, families of the past were a lot more like corporations today. House this or Clan that. It was basically GOT.

The modern family must look weird from a historical perspective. Also in Japan men are often adopted into families to continue that line for the corporation.

https://en.wikipedia.org/wiki/Japanese_adult_adoption

Would love to see an analysis predating the Renaissance and the Black Death I imagine these had a big impact but analyses of China and England have shown even revolutions fail to displace entrenched power blocs:

http://qz.com/314720/heres-the-surprising-social-trait-that-...

https://medium.com/@blackbitcoiners/bitcoin-has-failed-cdad9...

http://www.lse.ac.uk/economicHistory/workingPapers/2013/WP18...

I'd love for pg to way in too as a former florentine, an expert of the Renaissance, a promulgator of a contemporary renaissance(through YC [hackers==painters]), and thereby, a wealth transfer/creation expert.

The wealth certainly does not always last, one example is the Vanderbilts: http://www.nytimes.com/1989/09/24/books/more-money-than-anyo...

Florentine here. The owner of my company is one of them, he is from a very ancient and important family.

> As Gary Becker and Nigel Tomes concluded back in 1986, "Almost all the earnings advantages or disadvantages of ancestors are wiped out in three generations."

Ibn Khaldun said something similar too.

https://en.wiktionary.org/wiki/clogs_to_clogs_in_three_gener...

I've heard it "sandals to sandals in three generations" as well.

Hard working parents. Rich children. Stupid grandchildren.

I like the Italian "from stables to stars to stables"

Assuming it's an ergodic process, which is likely an unwarranted assumption.

Some discussion in The Millionaire Next Door about this as well.

The conclusion, if I recall correctly, was that there was an inverse relationship between the financial success of the child and the amount of money they were provided from their wealthy parents. More money from the parent generally just meant more consumption by the child, while depleting the assets of the parent. Thus less is inherited and the child has not learned to save and spends it all.

In the modern economy.

Six-hundred years ago, there weren't many paths to land rights (thus wealth) besides inheritance.

notice different direction - "today's rich families were rich 700 years ago" vs. "rich 700 years ago are still rich today"

Todays rich familys tell todays peasants that hard work will get them there?

700 years since 1427? What century are we in again?

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