The prospect of a new leftist party poses the question: what should its economic policies be?

I'll tell you what they shouldn't be: fiscal expansion. The macroeconomic policy stance must be a matter of fact, not ideology. And the fact is that we are close to the point at which increased aggregate demand would add to inflation expectations. That would mean higher interest rates, which in turn would depress much-needed housebuilding and other forms of capital spending. Rachel Reeves might be wrong to talk about fiscal rules but she is dead right to want fiscal restraint.

Here, every leftist is screaming: "we can have fiscal restraint and greater equality: tax the rich!"

As macroeconomic policy, however, this is questionable.

Remember the core truth of modern monetary theory - that the government does not need taxes to raise money; it can just print the stuff. Instead, the government needs taxes to reduce inflation. But taxing the mega-rich will only do this if it causes them to reduce their consumer spending or their contributions to Oxbridge college building. If instead they reduce their savings and their planned bequests there'll be no reduction in inflationary pressures.

To put this another way, the government needs more real resources: more care workers, nurses, solar panel installers and so on. These cannot come from the dole queues: they're not long enough for that. Instead, they must come from existing workers changing jobs. And this requires cuts in either private or public spending. Taxing the mega-rich isn't guaranteed to achieve this to a great extent - and it's surely unlikely that £1 of extra tax revenue will mean anything near £1 less spending.

This isn't to say we shouldn't tax the rich more. FAFO, especially as macroeconomic policy isnt everything: justice also matters.

What it does mean, though, is that leftist economic policy must be much more than taxing the rich. Here are a few possibilities.

"Don't do stupid shit." Barack Obama's motto for foreign policy should also apply to UK economic policy. It requires that we not strangle business with post-Brexit red tape and instead rejoin the single market. It means we shouldn't cripple some of our most successful export earners by limiting student visas or taxing them. It also means we shouldn't allow nimbys to stifle the night-time economy or block construction projects. And it means there's little case for higher military spending: in a resource-constrained economy, there are better uses for government money than boosting BAe Systems share price.

Economic democracy. It's no accident that our two decades of economic stagnation have coincided with high inequality, because there are many ways in which inequality - perhaps more of power than of incomes - depress productivity. As As Joe Guinan and Martin O'Neill say:

The institutional arrangements at the heart of today's British capitalism...together form a powerful engine for the extraction of value and its distribution upwards. It is this basic institutional design that drives the outcomes we are seeing in terms of crumbling public infrastructure, social atomisation, environmental degradation, and a widespread sense of popular disempowerment.

Economic democracy is a way of fighting this. The precise form it will take will vary from organization to organization, but will probably include democratic oversight of industry regulators and more user say in public services. Also important will be worker cooperatives because as Virginie Pérotin says:

Worker cooperatives are more productive than conventional businesses, with staff working "better and smarter" and production organised more efficiently.

Reform outsourcing. In some cases - such as children's homes, fostering services and adult social care and probation services - this has delivered bad performance. The alternative here isn't simply to bring all services in-house. One possibility would be to ditch the ideology behind outsourcing and rely on proper transactions cost economics, which tells us that when performance is hard to measure, direct oversight beats contracting. Another possibility is to use government and local authority procurement as a means of promoting coops.

Ameliorate the misallocation of labour. Any leftist government needs to increase jobs in public services, housebuilding and in greening the economy. But where will the workers come from?

The macroeconomic answer is to raise taxes, thus destroying jobs supplying consumer goods and services, compelling workers to move elsewhere. What this fails to address, however, is that market and government failure have created lots of wasteful labour. An excessively complicated tax system has bloated the legal and accountancy industries. Inadequate financial regulation and tax breaks have inflated a sector parts of which are "socially useless", to use Adair Turner's (pdf) phrase. Agency failures have created "bullshit jobs" and guard labour. Asymmetric information gives us fund managers "the vast majority" of whom are "genuinely unskilled". And unpriced externalities support jobs which produce not just environmental pollution but also intellectual and risk pollution.

How to shrink these industries is a question almost entirely ignored by mainstream politics. It shouldn't be.

Tax reform and simplification. A radical option here is to increase taxes on land (pdf), perhaps by replacing council tax and business rates with a land value tax; billionaires might be able to leave the country, but they can't take Essex with them. Other possibilities would be to equalize income and capital gains tax rates; unify income tax and national insurance contributions; or remove the interest deduction for corporation tax. And this is not to mention countless lower-revenue options that would cut red tape. The Mirrlees Review would be a good basis for starting to think about tax reform.

Stronger competition policy. Competition drives productivity; most efficiency gains come not from incumbent companies upping their game but from inefficient firms leaving (pdf) industries and newer ones entering. Government must facilitate this process by suppressing monopolies and encouraging new entrants. This requires more than aggressive competition policy. It might need a state investment bank to help finance start-ups. And it might also require a relaxation of intellectual property protections. Tech companies have already unilaterally abolished such protections, so they can hardly complain if a government were to give them their own medicine.

A maximum wage. This is often advocated on the principle of reducing inequality. But it might also create better incentives. If it is set as a multiple of an organization's lowest or median wage, it would incentivize bosses to increase these, thus sharpening incentives to raise productivity rather than merely increase exploitation. It might also, at the margin, disincentivize bonus culture (pdf) or office politics and so facilitate motivation crowding-in, whereby professional pride displaces chasing every pound. And if it applies to only some organizations, such as those in receipt of government money or companies in which bosses have only small ownership stakes, it would encourage business start-ups. It would tell bosses: "if you want big money, you've got to be an entrepreneur not a bureaucrat."

Reform utilities. An obvious possibility here is simply nationalization. Another would be to follow Dieter Helm's suggestion and replace them with a franchise model. A third would be to stop utilities buying regulators by placing them under more democratic control.

A sovereign wealth fund. In their excellent Angrynomics, Mark Blyth and Eric Lonergan advocate this as, in effect, a trust fund for the worst-off from which young people in the future can draw to buy housing or education. Another case for one lies in macroeconomic stabilization; to the extent that sterling tends to fall in recessions, the value of the wealth fund's overseas assets would tend to rise, which could be used to support economic activity in a downturn. Yet another purpose was suggested by Aneurin Bevan: public ownership of corporate assets gives a flow of dividends which could be used to fund public services.

Benefit reform. Yes, we should consider a universal basic income. Even if we don't go that far, however, we could move in the direction by making benefits simpler and less difficult to get (try applying for PIP!) or by letting people keep their benefits for a while when they find work, thus sharpening incentives to do so.

Universal basic services. This idea has been proposed by Jonathan Portes, Howard Reed and Andrew Percy and was discussed (pdf) at the time by the Labour party. It consists in expanding the welfare state to include free busses, council housing, phone, broadband, TV licences and some food. This would raise living standards for the worst-off without, they say, much reducing work incentives to the extent that the services are not withdrawn as people move into jobs.

All of this is of course only the merest outline, and isn't meant to be exhaustive. I've tried to keep it brief not merely because I don't want to test the reader's patience too much (this isn't Substack or a podcast) but because, to paraphrase Marx, there's little point writing recipes when you don't have a kitchen. A big priority for the left isn't so much to come up with ideas but to create a space where good ideas can be discussed intelligently. This requires the repairing of the public realm and the removal of the influence of liars, billionaires, racists, the lobby correspondent mindset, and culture war charlatans.

You will all have doubts about these proposals. But there's one issue that needs more attention than it gets.

The fate of many Sure Start centres shows the problem. Tories closed many of these even though IFS evidence shows that the fiscal benefits of them exceeded the costs. Which tells us that good evidence-based policies cannot survive a philistine government. This is an especial problem for nationalization; nationalized utilities merely give a future right-wing government stuff to sell off cheaply to their cronies.

The question, then, is how to future-proof policies. This is one case for universal benefits. It's also a case for greater devolution, so that national government can't wreck everything. And it's also a case for highly localized action - be it energy coops, credit unions, repair cafes, communal gardens and so on. But all this is another story.