The Proportional Solution for Economies with Both Private and Public Ownership
Abstract We ask: how should a planner, whose job is to respect public ownership of some productive assets, in conjunction with private ownership of some inputs, allocate resources? We call our proposal the Proportional Solution. It is characterized by the requirement that the final allocation be Pareto efficient and by the condition of equal returns to the use of privately owned inputs. We discuss this idea in a publicly owned firm, a cooperative, and a common pool resource. Our main result is the existence of proportional solutions in general convex economies. Journal of Economic Literature Classification Numbers: D50, D51, D62, L32, H23, H82, P13.