This paper shows how one can measure the overall efficiency of organizational decision -making to yield maximum organizational outputs under many constraints of economic, political and institutional variables. The case study taken in this paper includes Japan’s three public corporations, namely, the Japan Tobacco & Salt Public Corporation (JTS), the Nippon Telegraph & Telephone Public Corporation (NTT) and the Japan National Railways (JNR). In contrast to most economists’ approaches to the study of public corporations in terms of the concept of “market failure,” this study introduces a new concept of organizational behavioral, “inertia”, on economic decision-making, and next attempts to measure an organizational efficiency in a similar sense of Harvey Leibenstein’s “X-efficiency.” To formulate such a behavioral inertia, this study applies the state-space modeling, a common modeling technique in the modern control theory.