Palace economy

A palace economy or redistribution economy^[1] 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. In turn the population may be allowed its own sources of income but relies heavily on the wealth distributed by the palace. It was traditionally justified on the principle that the palace was most capable of distributing wealth efficiently for the benefit of society.^[2][3] The temple economy (or temple-state economy) is a similar concept.

The concept of economic distribution is at least as old as the advent of the pharaohs. Anthropologists have noted many such systems, from those of tribesmen engaged in common subsistence economies of various sorts to complex civilizations, such as that of the Inca Empire, 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.^{[citation needed]}

A palace economy is a specific type of distribution 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, or a group of priests in temple-led versions. 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 ruler pleases. Some may become merchandising capital, to be sold or bartered for a profit, or some may be reinvested in further centers, including additional production facilities, wars (economic activities from which a profit is expected to be extracted), favorable alliances, fleets, and mastery of the seas.

In ancient palace systems, the producers were typically part of the working capital. From highest to lowest, they were tied to the palace economy by bonds of involuntary servitude 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 had to provide food, clothing and shelter, which it often did on the premises.