Palace Economy

A palace economy or redistribution economy is a system of economic organization in which a substantial share of the wealth flows into the control of a centralized administration, the palace, and out from there to the general population, which may be allowed its own sources of income but relies heavily on the wealth redistributed by the palace.

The concept of a redistribution system is at least as old as the concept of Pharaoh, which means "great house" and describes the royal palace. Much later, the New Testament describes a population of early Christian communities giving all they had to the patriarch, who would return what they needed to live; as there is no Palace as such, this was similar to the equally ancient concept of Gift economy. Anthropologists have noted many such systems, from those of tribesmen engaged in common subsistence economies of various sorts to complex civilizations, such as the Incas, which assigned segments of the economy to specific villages. The essence of the idea is that a central administration plans production, assigns elements of the population to carry it out, collects the goods and services thus created, and redistributes them to the producers.

The Palace Economy is a specific type of redistribution system in which the economic activities of the civilization are conducted on or near the premises of central administration complexes, the palaces of absolute monarchs. It is the function of the palace administration to supply the producers with the capital goods for the production of further goods and services, which are regarded as the property of the monarch. Typically this is not an altruistic undertaking. The palace is primarily interested in the creation of capital, which may then be disposed of as the king pleases. Some may become merchandising capital, to be sold or bartered for a profit, or some may be reinvested in further centers, additional production facilities, wars (economic activities from which a profit is expected to be extracted), favorable alliances, fleets, mastery of the seas.

In ancient palace systems, the producers were typically part of the working capital. From highest to lowest, they were bound to the palace economy by indissoluble bonds of involuntary servitide or patronage. Any investment in a war would be expected to bring a return of plunder and prisoners, which became part of the endowment of the palace complex. The palace was responsible for meeting the expenses of the producers. It must provide food, clothing and shelter, which it often did on the premises, as in the case of female cloth manufacturers.