Inequality can be good for society — until it isn't

I'd always accepted the assumption that a certain level of inequality was good for society because it helps to motivate less-well-off individuals to get busy and up their game. But studies seem to suggest that the "machinery" of a sports team, a company, a community, etc., can be thrown out of whack by too much inequality. It sounds like the way that the machinery of the human body can be thrown out of whack by too much salt, too much vitamin D, etc.

Here's an excerpt from a June 5 piece on this subject in the NY Times by Nicholas Kristof, What Monkeys Can Teach Us About Fairness:

... Consider baseball: Some teams pay players much more disparately than others do, and one might think that pay inequality creates incentives for better performance and more wins.

In fact, economists have crunched the data and found the opposite is true. Teams with greater equality did much better, perhaps because they were more cohesive.

What’s more, it turned out that even the stars did better when they were on teams with flatter pay. "Higher inequality seemed to undercut the superstar players it was meant to incentivize, which is what you would expect if you believed that the chief effect of pay inequality was to reduce cooperation and team cohesion," Payne notes.

This might well raise doubts whether laissez-faire, libertarian, free-market economics is really the best way to promote human progress.