Policy debates about business reforms invariably rely on one big assumption: the basic mechanism of the public company has malfunctioned, and corrective regulation will help safeguard the interests of shareholders and the public. Look no further than the current financial-reform bill, with its plethora of new rules aimed at correcting incentive mismatches that led to excessive risk taking at big, publicly traded Wall Street firms. Or the debates on health care reform, where the initial political impulse was to impose a government option to rein in “greedy” publicly traded health insurers.

An emphasis on regulating the behavior of public companies is understandable: their steady spread across the US business landscape since the 18th century, partly in response to the capital demands of widespread industrialization, conveys an impression that they are the natural form for large enterprises. Yet throughout much of modern corporate history, other ownership structures, such as mutuals, partnerships, and cooperatives, also played a prominent role, coexisting with the joint stock company. These structures represent an alternative for tailoring ownership and governance to the risks and operating profiles of specific economic sectors. They might offer regulators cheaper and more effective ways of limiting financial crises and industry implosions. Some entrepreneurs may even find them a better way to raise capital and manage the risks of new businesses.