Mixed Public and Private Ownership of Productive Firms as a Necessary Condition for the Optimization of Firm Performance

Jarvis Jerome Lagman, Esq.*


This paper introduces a new theoretical model demonstrating that mixed public and private ownership of productive firms is a necessary condition for the optimization of firm performance. The new model suggests that the proportion of public to private ownership of firms should be precisely calibrated to an optimal equilibrium that balances political risk with the benefits of government ownership.

This paper proposes that government transactions in the equity securities of productive firms could be structured as (1) an innovation in fiscal policy, whereby the government purchases equity securities as a method of economic stimulus, and (2) as an innovation in tax policy, whereby government receives equity securities in lieu of (or as a supplement to) traditional income-based taxation. Furthermore, the shareholders of a firm are granted unique economic rights, voting rights, inspection rights, and litigation rights that are unavailable to any other party. The unique rights that would be attached to government’s standing as a shareholder (by virtue of its ownership of the equity securities of a firm) would form an alternative basis of legal authority for the government to regulate the operations and governance of productive firms. 

This paper demonstrates how mixed public and private ownership of productive firms would (1) optimize firm performance through the resolution of collective action problems that negatively affect the monitoring of firm governance, (2) improve the efficacy of bargaining in firm policymaking regarding the use and allocation of firm resources, and (3) mitigate systemic risk by diversifying the broader economy’s institutional sources of access to capital. Adoption of the proposed policies would cause a paradigmatic shift in the role of the government in economic activity and would create more dynamism in the government’s capacity to facilitate optimization, influence economic behavior, and improve outcomes more generally.

* Jarvis J. Lagman, Esq. is the Managing Partner of Lagman Legal, a law firm specializing in corporate and securities law located in Los Angeles, California. Mr. Lagman is a graduate of Middlebury College and the University of San Diego School of Law, and has previously been published in the Florida Journal of International Law, the Journal of Contemporary Legal Issues, and the American Bar Association Section of Taxation News Quarterly.