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Several botanical names derive from Greek myth, from the stories of gods who changed a hapless mortal into a plant. But Daphne gave her name to two completely unrelated shrubs.
Daphne was a maiden or nymph of uncertain parentage who was loved by the god Apollo. The early versions of this myth are only known now from fragments1. In most of the stories, it seems that she was a maiden huntress in the mode of the goddess Artemis, whose followers were sworn to virginity. However it happened, Apollo saw Daphne, fell in love with her and pursued her.
Daphne, seeing Apollo advancing upon her, took vigorously to flight; then, as he pursued her, she implored Zeus that she might be translated away from mortal sight, and she is supposed to have become the bay tree which is called daphne after her.(Parthenios of Nicea, Erotica Pathemata 1, from Diodorus of Elaea and Phylarchos, Epitome Mythike, Book XXV)
A variation by the ancient author Palaephatus had Daphne call upon her mother Gaia to save her, and the goddess took her into the earth, making the tree grow in her place, whereupon Apollo fell in love with the tree. (Palaephatus, Incredible Tales, 49)
The most complete version is from the Roman poet Ovid, who probably made most of it up, particularly the part where the god of love, Eros, fired a golden arrow at Apollo to make him love Daphne, and a rusty arrow at her so she would be repelled by him.
Her strength spent, pale and faint, with pleading eyes she gazed upon her father's waves and prayed, "Help me my father, if thy flowing streams have virtue! Cover me, O mother Earth! Destroy the beauty that has injured me, or change the body that destroys my life."
Before her prayer was ended, torpor seized on all her body, and a thin bark closed around her gentle bosom, and her hair became as moving leaves; her arms were changed to waving branches, and her active feet as clinging roots were fastened to the ground- her face was hidden with encircling leaves.- Phoebus admired and loved the graceful tree, (For still, though changed, her slender form remained) and with his right hand lingering on the trunk he felt her bosom throbbing in the bark. He clung to trunk and branch as though to twine. His form with hers, and fondly kissed the wood that shrank from every kiss.
And thus the God; "Although thou canst not be my bride, thou shalt be called my chosen tree, and thy green leaves, O Laurel! shall forever crown my brows, be wreathed around my quiver and my lyre; (Ovid, Metamorphoses, 1, 545-560)
This was the tree named Daphne by the Greeks, but we know it today by its Latin name, Laurel. There are several species of Laurel, but the tree sacred to Apollo was Laurus nobilis, also known as the Bay Laurel, Sweet Bay or Bay tree because its leaves are used in cooking under that name.
Laurus nobilis is a small evergreen tree with aromatic leaves and small, pale yellow flowers. It is grown primarily for its leaves and also as an ornamental shrub.
In Delphi, where Apollo had his famous oracle, the Pythian Games were held in honor of the god, with competition among poets, singer and musicians, since Apollo was the god of music and poetry. The prize for the victors was an crown of Laurel leaves.2
The question remains: why did the Romans call the tree Laurel (laurus) instead of the Greek Daphne? While no one knows for sure, it has been suggested that the word "laurel" derived from the word "daphne," by means, I suppose, of changing every letter in the word. I am dubious about this explanation and prefer a different answer. I think that "laurus" might have come instead from the Latin root LAUD, which means "praise." Unlike the Greeks, Romans didn't give prizes for poetry, but their victorious generals wore Laurel crowns when they marched through the city in triumph.
So the answer might be: the Romans didn't call the tree Daphne because they were already calling it Laurel, perhaps before they had even heard the Greek myth.
But there is a complication. There is another, completely unrelated genus of shrubs called Daphne, containing at least fifty different species. They are members of the family Thymelaeaceae. The members of this genus are either deciduous or evergreen shrubs with inconspicuous flowers and lanceolate leaves that resemble those of the true laurel. Unlike the true laurel, however, all parts of these shrubs are poisonous. They can also be invasive in some circumstances, but they are grown primarily for the fragrance of their flowers.
The Greeks knew of this shrub and called it "knidia," which means "from Knidos." In Latin the name was "gnidium." Some species of this shrub have the common name of "spurge-flax" (Daphne gnidium) or "spurge-olive" (Daphne oleoides), although they are no more a true spurge than a flax or an olive or a laurel. I don't know who decided to give the name Daphne to this genus of shrubs, but it is not hard to guess the reason. Someone obviously thought these shrubs resembled the Laurel. Indeed, one species is named Daphne laureola, otherwise known as "spurge-laurel." I suppose that because the name "Daphne" wasn't being used, it seemed like a good idea at the time, but I wish they had had second thoughts.
Just in case this isn't enough, there are quite a few other totally unrelated plants named Laurel, such as the Mountain Laurel (Kalmia latifolia.) There are also several other plants named after Daphne, such as the family Daphniphyllacea, which means "Daphne-leaved." But it might be best not to go there at this time. One nymph has certainly propagated quite a lot of confusion about her name.
1 Most often, Daphne was called the daughter of Gaia and the river Ladon, but Ovid named her father the river Peneios. Phylarchos claimed that she was the daughter of Amyklas the king of Sparta, but this suggests that he might have confused Daphne with Hyakinthos, son of Amyklas, who was killed by his lover Apollo and turned into the Hyacinth. For more details on this myth see here.
2 Each of the Panhellenic games was dedicated to the worship of a particular god, and the victors were crowned with the leaves of a plant sacred to that god. The Olympic Games, for example, were dedicated to Zeus, and the victors received a crown of olive leaves.