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[Granite26]

For DF, I think the most practical solution would be to balance demands with a market system, keeping supply under the player's control. That's more or less how it is now, but with prices of labour and goods under player control. The dwarves would then buy what they like (and it's best to let them buy and place their furniture too), and if something is lacking they would go to the relevant guildmaster and request it. Those guildmasters then give you a nice report about the needs of the community.
Additionally, keep a marketplace where foreign merchants can sell their goods privately. These would be only consumer goods; the raw materials trade would remain under player control (including semi-finished products like cloth).

I think you've hit the nail on the head here, although I'd be more of a 'Free Market determines prices, wages are hard set' kind.

Player managed wages would be a good way to prioritize tasks indirectly.  Dwarf will balance interests with profit motive.

I love the marketplace idea...

[dwarfed one]

How economy worked in ancient and medieval times, especially for small communities:
right of wealth distribution was one of most important rights and duties of leaders. Starting from food to rare valuable things. Usually they did only distribution of excess and deficit goods according to recent behavior and achievements of clan members. Few gifts even could grant higher social position. Better the 'gifts management' is - better the reputation and authority of leader.
In early protostates all skilled crafters were controlled by high authorities and made things for their requests. Things were made for own use mostly, but with excess and were distributed as gifts to subordinates and as diplomatic offers. Kind of this system existed long time in many countries even with quite developed market system. Servants in houses of nobles made a lot of things to masters for free as duty or tribute of respect and got some gifts back also. 
Value of things always was quite subjective.

What could be made in DF:
- all things with quality above average used in fortress should be distributed only by leader for some achievements or for certain proposes. For example, warrior who killed few goblins in last battle could receive *silk socks*. Same warrior wounded in battle could also receive an amulet which will improve his mood and make healing faster. It also good way to improve mood of depressed dwarfs, but such behavior makes gifts less valuable.
Clever leader knows what kind of things dwarfs likes and mandate production or purchase of them beforehand. May be we should ask for special "prize" objects to be introduced, like medals.
Finally, just imagine picture on the wall "Great countess Urist grants the Champion Lor Tetothast with Uzerbkaster axe for victory over dreadful Zombie Dragon Drumbambum".
Prizes for quests in adventure mode also would fit into this "legendary gifts" scheme and would be recorded in annals;
- leader should provide food and things for important parties and funeral feasts, ritual gifts could be presented in course of them;
- usual dwarf also should make gifts sometimes;
- weapons and armors should be assigned only by Guard commander or by player (especially heavy decorated expensive ones);
- production mandates should specify quality level;
- if there are not enough basic things, nobles also could mandate it's production. For example, soon after arrival outpost leader could order few beds, table and chairs. May be it shouldn't  be mandate, but kind of advise to player what should be produced;
- only adequately presented common items could be available for trade, any deficit or important items would be presented to leader or expropriated with or without some compensation .   Only food excesses could be available for trade (also except best ones). So economic becomes heavily regulated as it was those times in reality;
- dwarfs ready to pay more for preferred things;
- interracial trade prices should be altered according to value of things to those races. Elfes could sell wooden items for usual prices and refuse or pay little if you want to sell it to them. Human traders should pay less for small or narrow clothes.

[TrombonistAndrew]

What could be made in DF:
- all things with quality above average used in fortress should be distributed only by leader for some achievements or for certain proposes.

I disagree, but you list a bunch of good ideas.

I think that if there is a time period after which an item is created to sell it, that period should include the option for the government to force-buy it or to seize it. For the most part, the player is not going to want to individually distribute ALL items made with above average quality. That's way too much forced micromanagement.

[dwarfed one]

For the most part, the player is not going to want to individually distribute ALL items made with above average quality. That's way too much forced micromanagement.

Of course, player shouldn't, nobles will do it automatically. Then I mention the 'Leader' I mean only in game character.  Player could have right to seize property, and it would depress dwarfs for sure. It would be fun to struggle with generous outpost leader

[Random832]

Support with one caveat:

"above average quality" should mean "above the average quality level of items of that type available in your fort", not "above (some particular number) quality modifier" - maybe have it be the top 50% (or some other fraction) by value.

[Granite26]

What could be made in DF:
- all things with quality above average used in fortress should be distributed only by leader for some achievements or for certain proposes.

I disagree, but you list a bunch of good ideas.

I think that if there is a time period after which an item is created to sell it, that period should include the option for the government to force-buy it or to seize it. For the most part, the player is not going to want to individually distribute ALL items made with above average quality. That's way too much forced micromanagement.

I dunno, I could see a goblin/tribal fort where all Masterworks (or whatever) went into a pile for the player to distribute as rewards, and the distribution of rewards being a major play mechanic for controlling the society (think Majesty here), both through making the performers happy, and showing the populace what behaviours they should emulate.

[Mikademus]

How economy worked in ancient and medieval times, especially for small communities:

There are quite a few scientific no-nos in what you write (gross simplifications, ethnocentrism, overgeneralisations, intellectualism and teleology [assuming progression along specific stages] etc), so I'd not advice anybody to listen to that part of your post, but creds for some good suggestions, some of which I think would help make the game even more enjoyable, which is what it is all about anyway.

[dwarfed one]

There are quite a few scientific no-nos in what you write (gross simplifications, ethnocentrism, overgeneralisations, intellectualism and teleology [assuming progression along specific stages] etc), so I'd not advice anybody to listen to that part of your post, but creds for some good suggestions, some of which I think would help make the game even more enjoyable, which is what it is all about anyway.

Yes, professional historian and cultural anthropologist will tell it much better and it would be nice to hear his opinion. Problem is the game reality is also quite simplified and overgeneralized. Moreover, dwarf society come through stages of development with grow of fort, so such generalized ideas could fit well.

P.S. Heavily edited "historical part"

[scribbler]

I freely admit that I skimmed more and more as I went on; I just want to make three points.
a) Dwarves are more community oriented than humans (like us). They may view a job as lower class but respect that someone is doing the necessary work.
b) The economy of a fortress can't exist in a vacuum, relative trading values with caravans aside, there's the interaction with the greater dwarven economy which leads to overall trade mandates and arbitrary valuations. In other words the dwarves probably control the amount of certain crafts and materials leaving in order to maintain an edge in the military and preserve values.
c) Given the complex nature of any economic system it may be best, for such a complex multi-level game, to allow that certain values are based on dwarven tradition and custom. (In this case tradition referring to what has always been done and custom to what everyone else is doing.)

My suggestion: a two value system of what something is worth generally two dwarves and how dwarves would value it for trade (dependent on species and relation). Noble mandates (which are local) would adjust these levels to  compensate for surplus or shortage or external demand. Wouldn't you prefer to see a noble demand that certain trade goods be manufactured because he's been made a solid offer? Or see an order for smoothing the hauler's quarters because it's an embarrassment, they're fellow dwarves or just because they're dragging down property values?