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A palace economy or redistribution economy^[1] is a system of economic organisation 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. It can be seen as a combination of a command economy and a subsistence economy.

This was characteristic of Bronze Age absolute monarchies where the sacred king and his bureaucrats controlled all aspects of the economy. The palace directed agriculture by doling out seeds and using the calendar to decide planting time. The king commissioned large public work projects and monument building such as palaces, tombs, and temples.

An example is the Minoan civilisation which depended economically on the cultivation of wheat, olives, grapes and other products. The Minoan economy also supported several industries such as the textile, pottery and metalwork industries. Some of the manufacturing industries were based in the palaces. Produce from surrounding farmland was collected, recorded, and stored in the palaces as seen from the large number of storerooms and pithoi (storage jars) recovered. The palaces appear to have had an extent of control over overseas trade. The discovery of Linear A and Linear B tablets, listing commodities in the archive areas of the Palace of Knossos, suggests a highly organised bureaucracy and a system of record keeping that controlled all incoming and outgoing products.

The palace economies in Ancient Egypt, Mesopotamia, Anatolia, and the Levant were waning in the late Bronze Age, being replaced by primitive market economies led by private merchants or officials who owned private businesses on the side. The last holdout and epitome of the palace system was Mycenaean Greece which was completely destroyed during the Bronze Age collapse and the following Greek Dark Ages.

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