The Motivating Power of Money

Functionalism argues that inequality is good to the degree that it creates motivates people to work hard and take risks, but the motivating power of money varies.

The more money you have, the less valuable each additional unit is to you.

A $5,000 bonus is far more valuable to a person making $40,000 a year than to a person making $400,000 a year. If Bill Gates drops a thousand dollar bill, should he pick it up?

This is a problem because the theory tells us that inequality is a benefit to society, but each additional unit of inequality (say dollars for convenience) necessarily buys less social benefit than the previous unit. At some point, the problems created by inequality outweigh its benefits.*