I have assigned a good article, "The Rise and Fall of Narratives of Benign Inequality," the lead essay by David Grusky and Szonja Szelenyi in their fine Inequality Reader. They start with functionalist arguments made in the 1940s and 1950s that inequality serves a social purpose. They review several arguments that inequality is benign because it is declining. Then they outline some of the more recent arguments that inequality is bad in ways previously unexplored, such as in creating terrorism or environmental degradation.
Yet they never really take up the challenge of the functionalist argument. What Kingsley Davis and Wilbert Moore argued in their famous article of 1945, for example, is that inequality serves a positive good. Society needs to get people with rare talents and/or training into hard, socially useful jobs. Therefore, it is good for society if such positions carry more rewards. Hence, inequality is functional for all. The later studies that Grusky and Szelenyi consider are not arguments for the social necessity of inequality, but empirical studies of declining inequality. Since income inequality did not flatten out, as the Kuznets curve predicted, and has been rising lately in the age of Bill Gates, those optimistic studies of a generation ago seem naive.
Yet empirical studies of the rise and fall of actual inequality, especially of something so elastic as income, or wealth, does not address the main point raised by Davis and Moore: is inequality, in some form and to some degree, ultimately beneficial for all?