In-breeding appealed to political and economic dynasts, such as the Habsburgs and Rothschilds, because it doesn't dissipate family assets to too many heirs.
The Habsburg dynasty that reigned over much of Europe from the late medieval period to the last days of WWI is notorious today for the inbreeding that beset Charles II, the Habsburg king of Spain from 1665-1700. Wikipedia explains:
Charles was born in Madrid, the only surviving son of his predecessor, King Philip IV of Spain and his second Queen (and niece), Mariana of Austria, another Habsburg. His birth was greeted with joy by the Spanish, who feared the disputed succession which could have ensued if Philip IV had left no male heir.
17th century European noble culture commonly matched cousin to first cousin and uncle to niece, to preserve a prosperous family's properties. Charles's own immediate pedigree was exceptionally populated with nieces giving birth to children of their uncles: Charles's mother was a niece of Charles's father, being a daughter of Maria Anna of Spain (1606–46) and Emperor Ferdinand III. Thus, Empress Maria Anna was simultaneously his aunt and grandmother and Margarita of Austria was both his grandmother and great-grandmother. This inbreeding had given many in the family hereditary weaknesses. That Habsburg generation was more prone to still-births than were peasants in Spanish villages.
There was also insanity in Charles's family; his great-great-great(-great-great, depending along which lineage one counts) grandmother, Joanna of Castile ("Joanna the Mad"; however, the degree to which her "madness" was induced by circumstances of her confinement and political intrigues targeting her is debated), mother of the Spanish King Charles I (who was also Holy Roman Emperor Charles V) became insane early in life. Joanna was two of Charles' 16 great-great-great-grandmothers, six of his 32 great-great-great-great-grandmothers, and six of his 64 great-great-great-great-great-grandmothers.
Dating to approximately the year 1550, outbreeding in Charles II's lineage had ceased (see also pedigree collapse). From then on, all his ancestors were in one way or another descendants of Joanna the Mad and Philip I of Castile, and among these just the royal houses of Spain, Austria and Bavaria. Charles II's genome was actually more homozygous than that of an average child whose parents are siblings. He was born physically and mentally disabled, and disfigured. Possibly through affliction with mandibular prognathism, he was unable to chew. His tongue was so large that his speech could barely be understood, and he frequently drooled. It has been suggested that he suffered from the endocrine disease acromegaly, or his inbred lineage may have led to a combination of rare genetic disorders such as combined pituitary hormone deficiency and distal renal tubular acidosis.
Consequently, Charles II is known in Spanish history as El Hechizado ("The Hexed") from the popular belief – to which Charles himself subscribed – that his physical and mental disabilities were caused by "sorcery." The king went so far as to be exorcised.
The San Fernando Valley in the 1970s was a very dull place. Hot and dusty, filled with lackluster architectural construction thrown together during the postwar housing boom, it was the last place I wanted to be.
Back in those far-off days, the LA Archdiocese’s paper, The Tidings, ran a column by the Archduke Otto von Habsburg, son of Austria-Hungary’s last Emperor-King.
I read him, too. The Tidings' other columnist back when I was 12 was the almost as cosmopolitan Erik von Kuehnelt-Leddihn. We got a quality dose of high-brow Mittel-Europa punditry in the San Fernando Valley
Otto, who stopped appearing in public after the death of his wife, Regina, last year, is survived by his younger brother, Felix, as well as 7 children, 22 grandchildren and 2 great-grandchildren.