Rabbi Steinsaltz: Rabbi Chaim Vital in Sefer Etz Hayyim states that our world is for the most part is a world of evil. Evil is the ruler of this world and there is very little good in it. In the 18th century there was a dispute between Leibnitz and Voltaire. Leibnitz said we lived in the best of all possible worlds and Voltaire mocked Leibnitz and concluded that we live in the worst of all possible worlds. Looking at this question from a Jewish point of view, one could say that "We are living in the worst of all possible worlds in which there is still hope." There are, indeed, worlds below us in which there is no hope at all, and this is what we call "Hell." But to speak of the entire structure of our own world: it really is a world on the very brink. If it were to be ever so slightly, worse than it actually is, its basic structure would become entirely hopeless; the balance would be irreversible and evil would be irrevocable.
As it is now, evil can be conquered but in a world in which we have to accept a vast amount of evil. This is not usually understood as a Jewish idea, but it is really a statement of "Jewish optimism." If a person sees the world as all pink and glowing, he is not an optimist, he's just a fool. An optimist is one who in spite of seeing the terrible facts as they are, believes that there can be improvement. If everything were all right, then you wouldn't have to be an optimist. So Jews are optimists because we are a people with hope and we have a theology of hope.
Q: But has G-d placed us in this worst of all possible for a reason?
Rabbi Steinsaltz: Some mysteries simply cannot be answered. One of these is the purpose of Creation. The Midrash says that the Almighty had a desire, and if you have a desire you don't ask "why?" A taiva is something we can't explain. To answer a question about the "why" of Creation can, philosophically, be proven to be impossible. You get to a point where you are asking questions that are unanswerable, not because we lack knowledge, but unanswerable by definition. But this much can be said: When you speak about the world from this point of view, it is, so to speak, an experiment in existence, an experiment which might be called "conquering the extreme case." So in a way, existence in any other world is not "proof." Proof in an extreme case occurs only when you can do things under the worst of circumstances.
For instance, if you want to test a new car, the way to do it is not on the smoothest of roads, under the best conditions. Instead, it has to be tested under the worst conditions possible in which there is yet hope. I cannot test it by driving it off a cliff, but I can test it on the roughest terrain where I must come to the edge of a cliff and have to stop. How is a new plane tested? They put it under nearly impossible conditions, which the plane must withstand. Otherwise the whole experiment doesn't prove anything. The same with Creation. Creation would have been pointless unless it was a Creation under precisely these difficult circumstances. So the worst possible world in which there is yet hope is the only world in which Creation makes sense.