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Wealth and income inequality have recently gone down in the U.S. and other parts of the West. The decline has been going on for the better part of the last decade. Yet it is not clear, to me at least, whether this is something to celebrate.

The recent decrease in inequality should come as no surprise. Markets are well below their late 2021 levels, and the wealthy hold a disproportionate share of the stock market. Executive compensation also tends to move with the markets, which affect the wealth of founders such as Mark Zuckerberg, who according to one measure has lost about three-quarters of his peak net wealth. And then there are all those former crypto billionaires.

At the lower end of the income scale, the picture is more complex. But the labor market has yet to crash, the current unemployment rate is 3.7%, and there are signs of an inflationary soft landing. Over the third quarter of 2022, the bottom 50% saw real incomes rise an average of 1.5%.

None of those narratives are finished — but for the less affluent matters could be worse.

I am not here to shed tears for the very wealthy or to argue that the bottom half doesn't need more help. I would merely observe that lesser wealth and narrowing income inequality have not brought new glories to the world.

Of course poorer people would be better off if they had more money, and we should enact policies to help bring that about. But critics of inequality make a different and much stronger set of claims, saying that inequality is responsible for health problems, despair, bad governance and social unrest. Those arguments — focusing on inequality rather than poverty — are an essential part of the current critique of capitalism.

Declining income inequality is not without downsides. Charitable giving is likely to fall. Fewer ambitious corporate projects will be undertaken. Major technology companies, which have seen some of the biggest declines in value, are laying off workers, most of whom will probably get lower-paying jobs.

To be clear, these are manageable problems. But they are problems nonetheless. Some number of Americans, above and beyond the wealthy, will be worse off because the riches of the very wealthy have declined.

And it's not as if people on the lower end of the income scale feel happier or become healthier because the wealthy are now poorer. For most Americans, life goes on; their main economic concern is that high inflation will eat into potential wage gains.

Nor is it the case that the proletariat have taken hold of the reins of power and a new populist utopia is nigh. The very wealthy might make fewer political donations, but the influence of money on politics was overrated in the first place. It hardly seems like a new era of egalitarian redistribution. Instead, Western government budgets are fairly tight, and in the U.S. in particular the set of plausible policy alternatives is likely to get more narrow.

For at least two decades, the attention given to rising income and wealth inequality was huge, among both policymakers and academics. Over the last decade, the attention given to falling income and wealth inequality has been tiny. Our views of this issue, shaped by the media, may be seriously out of date.

I am by no means convinced that this reduction in inequality will continue. Forthcoming technological advances will have unpredictable effects. But if the last decade proves to be an interlude, there is still a lesson: Maybe inequality wasn't the problem in the first place.

The real challenge isn't how to reduce the difference in wealth between the rich and the poor. It's how to reduce poverty.

Tyler Cowen is a professor of economics at George Mason University and writes for the blog Marginal Revolution. He is co-author of "Talent: How to Identify Energizers, Creatives, and Winners Around the World."