The current rate of inequality is massively inefficient if you're trying to optimize happiness. The bottom 2 quintiles of Americans control so little wealth that keeping food on the table is their primary concern. Meanwhile, an extremely small and shrinking proportion of the population control an outsized amount of wealth, to the point where it's not reasonably usable in an efficient way by those people.
It's like saying that the proper way to divide 100 loaves of bread between 100 people is to give 1 person 95 loaves and every other person a slice of bread. No one is starving, but you're making 1 person very happy at the expense of 99 others.
My argument is, for the bottom 40% of Americans, it is at that level. The fact that the top 20% holds a vastly disproportionate share of the wealth isn't bad because the 40% are losing a dick-measuring contest, it's bad because the lack of wealth of the 40% has a real effect on their happiness.
Do you think that this kind of disproportion doesn't affect the way the whole system works? I expect the voice of a CEO to be heard more than that of a ordinary worker, and at 20:1 maybe I can sort of keep up. But at 354:1, how will I ever keep up? That's stopping the CEOs of the world from banding up in a gang that distorts how democracy works up to a point where I don't matter at all?
A valid criticism of socialism for running societies (rather than institutions) is that it doesn't align well with "human nature" - but it might also be the case where the "winner takes all" aspects of capitalism also have similar problems.
http://news.nationalgeographic.com/news/2003/09/0917_030917_...
I'd argue that inequality pretty much always leads to unfairness.
Edit: And I say that as someone who pays for their kids to be privately educated at a prestigious private school because it is obvious that doing so gives them an unfair advantage.
Reducing inequality down to the point of literal equality was shown to lower the quality of life.
