From what I understand, OP...the idea was that since this game/franchise are based around upgrading and finding treasure/gear, that making the level cap 60 (instead of D2's 99) would ensure people arrived at the highest level the fastest, and that peoples' gear could be what set them apart from others. Going from D2 to D3, there are a lot more gear slots, and RNG ensures the maximum possible variety in drops.
However, what's occurred is that a vast majority of people see the Auction House as a primary source of gear upgrades, thus most people wanting the best possible gear combos will equip themselves with pretty much the same stuff.
So, to offer at least SOME difference from one character to the next, they introduced the Paragon system, which accomplishes two things: 1) with 100 more levels, it further differentiates a "low" level character with a "high" level character. 2) by increasing innate Magic Find, players can grind to higher Paragon levels and find better gear on their own, without NEEDING Magic Find affixes on gear. For instance, by the time you get to Plvl 90, you should need very little Magic Find gear, because your Paragon level allows you to hit the 300% cap much easier.
So that's why. Their initial philosophy was somewhat sound, however even if the Auction House wasn't there, and everyone was finding their own gear to set them apart, I think people would still want to gain more levels and have a bigger number than another player/character. Know what I mean?