Tyler Cowen on inequality and the business cycle

This recent piece by Tyler Cowen in the American Interest is really two pieces in one: a nice, low-tech essay on trends in income inequality followed by, and linked to, Tyler's theory of the financial business cycle. I'm not really qualified to judge the latter, but the former seems correct and wise.

I particularly liked this bit, which has occurred to me as well:

The funny thing is this: For years, many cultural critics in and of the United States have been telling us that Americans should behave more like threshold earners. We should be less harried, more interested in nurturing friendships, and more interested in the non-commercial sphere of life. That may well be good advice. Many studies suggest that above a certain level more money brings only marginal increments of happiness. What isn’t so widely advertised is that those same critics have basically been telling us, without realizing it, that we should be acting in such a manner as to increase measured income inequality. Not only is high inequality an inevitable concomitant of human diversity, but growing income inequality may be, too, if lots of us take the kind of advice that will make us happier.

To me, our concern should be with the worst off, particularly poor children and particularly those who are badly off largely due to factors outside their own control, rather than with inequality per se.