A palace economy is an economy in which goods are not privately exchanged but rather are sold to, confiscated by, or otherwise acquired by a centralized administration, which then handles distribution of said goods to the public. Though the name references a palace, the administration in question may be a temple, church, or other such entity instead.
On Kishar, palace economies were once widespread around the Three Great Seas, and around the Chaska Sea in particular, but today the institution remains strong only in Khapesh, Dalbanu, and some of the Eastern Chaskan city-states. During the lives of the Eternal Suzerain the Sangiran Empire operated under a palace economy as well, but this largely collapsed amidst the Suzerain's last death and the ensuing decentralization of the empire. Still, in some imperial provinces, such as the Sangiran heartlands, Lelwani, and Kintaka, some degree of the practice still remains.
In places like Khapesh, palace economies are used as a way of ensuring stability between the years of good and poor floods. By requiring all staple goods and necessities to pass through the temples, prices and rations can be controlled and spikes in prices constrained. This also, of course, confers great political power to the temples.
Palace economies do not entirely preclude the notion of private commerce. Foreign merchants selling their goods in a place using a palace economy are sometimes required to sell only to central authorities, but this is broadly uncommon. More typical, for both external and internal trade, is that only certain goods are centrally bought and distributed, which leaves plenty of space for merchants trading specialty or luxury wares.