Does the way we spend our money make us happy?

I am sure that you have heard multiple times “money doesn’t buy happiness.” This is a statement that many people stand by and yet we are still focused on maximizing our wealth and making the most money possible. Michael Norton in his Ted Talks segment argues that money can buy happiness we just have to spend it in the right way. He conducted three different studies that all came to the same conclusion. If we spend our money on other people rather than ourselves it will bring us happiness. If we choose to simply spend the money on ourselves we will get no happiness from it.

When thinking about how this ties into the business world I began to think about shareholderism and stakeholderism. Shareholderism argues that managers should make decisions only to maximize profits and to maximize shareholder wealth. Managers will get happiness from this because they are giving money to others, but if they have stock themselves, which most are, they are simply choosing to put money in their own wallets, and no happiness will come from this. The shareholders will only achieve happiness if they are making choices to spend this money on others rather than themselves. This puts the responsibility on them and most humans will choose to spend money on themselves rather than others.

On the contrary, stakeholderism argues that managers have to think of all stakeholders in a business (those effected by the business’s decisions, the companies employees, the companies shareholders, etc.) when making a business decision. The main goal is to maximize all of the stakeholder’s happiness rather than wealth and profits. It takes the responsibility away from the shareholders and makes it the businesses responsibility to make the choice of how to spend their money. Under stakeholderism the business is more focused on spending their money on others rather than the business itself. This will result in happiness for the managers as well as all of the shareholders because they are ‘owners’ of a company that chooses to give to others.

Consequentialism argues that the right actions are the ones with the consequences that maximize happiness for all. If happiness is the overall goal, which I believe it is, then it is clear we should spend our money on others. Stakeholderism will result in the most happiness compared to shareholderism. The managers of the business have the responsibility to spend the companies money to help the environment, pay higher wages to international workers, to use more responsible suppliers, etc.. Most people choose to spend money on themselves rather than others so if maximizing shareholder wealth is the only goal, the majority of shareholders will not choose to spend their money in the ‘right’ way. Yes, this puts the responsibility on the businesses, but I believe that if they are focusing on maximizing happiness for all, managers will see that giving money to others best achieves this.

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6 responses to “Does the way we spend our money make us happy?

  1. I really liked this topic for your blog post and you did a great job connecting it to what we’re learning in class. I completely agree that stakeholderism is more like spending money on others which therefore increases the happiness of individuals and the firm as a whole. I think this concept should be spread to those who don’t take advantage of stakeholderism yet. How could we share this idea on a large scale?


  2. I think the topic of this talk is interesting. Most people do not want to spend their money on others because they earned it and feel no obligation towards giving it to other people. I agree with Julia that you did a great job relating the talk back to the topics in class. Consequentialism is intriguing to think about in this situation.People want to do the right thing but also don’t want to give up their hard earned money.


  3. You write:
    ” Under stakeholderism the business is more focused on spending their money on others rather than the business itself. ”

    I think your arguments actually go against this. By using resources on the purpose of the business, on improving the value chains that permeate the business, the company IS spending money on itself, but its “self” includes the ecology of stakeholders and hence spending money on the business is spending it on others.

    Stock buybacks, or retaining profits to boost share price, when managers are deeply invested in short term stock option plans, is like your spending money on oneself.


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