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From Norman Davies' Europe: A History, p. 169

The Gaels of Scotland and the Jews of Poland were two ancient communities who long escaped surnames (the modern-day purpose of enforcing family names being to bring individuals in the state's net of censuses, tax-collecting, and conscription). Both had enjoyed communal autonomy, surviving for centuries with traditional name forms using either patronymics (such as the Jewish 'Abraham Ben Isaac', i.e. Abraham, son of Isaac) or personal epithets....

After the Partitions of Poland, Polish Jews in Russia usually took the names of their home towns or their noble employers. In Prussia and Austria they were allotted German surnames by state officials. From 1795 to 1806, the Jewish community of Warsaw found itself at the mercy of E.T.A. Hoffmann, then chief Prussian administrator of the city, who handed out surnames according to his fancy. The lucky ones came away with Apfelbaum, Himmelfarb, or Vogelsang: the less fortunate with Fischbein, Hosenduft, or Katzenellenbogen.

E. K-O. adds: Katzenellenbogen was also the name of a Grafschaft somewhere close to to the Rhine. So the name may easily be one of the 'locality' or 'noble employer' type.

Tom L added further: In most cases, I think, Jews who wanted a desirable name had to pay for it. If I'm not mistaken, Jews weren't allowed to exercise professions or become members of guilds during the medieval period, which is why many of them become money lenders, something a Christian couldn't in theory do. These conditions culminated in an eastward movement of the Jews from Germany to the Slavic areas in the 15th century, taking their language with them. Here many of them became farmers. This is how Jiddisch evolved from German.

There is a Jewish joke about the man whose friend consoled him because he hadn't had enough money to buy a nice name such as Rosenberg or Lilienthal and ended up with Schweissgeruch. His response was, oi, what I had to pay for the w. I've never encountered either name, but I've seen some that suggest a similarly malicious origin. Several years ago I had a student named Kotz, for example.

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