In an interview with Times Higher Education, Craig Calhoun said that any benefits accruing from turning down public cash "would not outweigh the support from government" despite the LSE's low levels of public funding. Just 12.7 per cent of the institution's income came from England's funding council in 2010-11 - a percentage likely to fall further as teaching grants for classroom-based subjects are axed.
Privatisation was examined by the LSE in 2010 but Professor Calhoun, a former president of the US Social Sciences Research Council, insisted that it should stay in the public domain despite his frustration with government regulation.
"It is certainly true that we spend millions of pounds each year dealing with rules and regulations that are not always thought out very well," he said. "On the other hand, the government does provide significant research funding, money for buildings and the government-backed student loan scheme."
He added: "Being a public university also helps the institution to engage positively in public debate and influence policy."
The LSE's commitment to increasing public understanding was a key reason for his taking the job, said Professor Calhoun, previously director of New York University's Institute for Public Knowledge.
"There is no other university that does this as well," he insisted. "I've spent most of my life engaging with the social sciences at an interdisciplinary level...improving public engagement."
After taking his doctorate in sociology at the University of Oxford, Professor Calhoun taught at universities in the US, Africa and China. He has also advised governments in Eritrea and Ghana. "It was not book learning but practical learning," he said.
He said he believed that the LSE had learned valuable lessons since the departure of his predecessor Howard Davies over the university's links to the regime of Libyan dictator Mu'ammer Gaddafi.
"It was something bad, but it happened for well-intentioned reasons," he said. "There was a desire to use knowledge to promote positive change.
"There is now the need to have checks and balances to find out where outside money comes from, but there is no less desire to engage globally and work to create a better world."
Professor Calhoun's readiness to criticise government policy might also indicate a return to the LSE's dissident roots. Last week, he co-signed a letter to the prime minister over rules (now revised) that led overseas students to queue overnight to register with the police. He also said that scrapping direct teaching funding for non-science subjects revealed a "narrowness of vision".
"It could be that I am an outsider who has yet to learn when to recognise my betters," he joked. "But the LSE...has always been unafraid to speak truth to power."