National Happiness: Determinants and Measurements

Traditionally growth has been interpreted in terms of GNP. For decades economists focused on income related measures but the experience of many third world countries in 50s, 60s and 70s, led to disenchantment with GNP as a measure of growth. Despite achieving growth targets many developing countries could not improve living standard of their people.  This led to the realization that income is important but not all important. Income is not an end in itself but a means to the end (well-being). It began to be felt that development should be a mechanism for better quality of life. An increased number of economists and policy makers started clamouring for dethroning GNP and replacing it with a broad measure of development. This led to the development of Human Development Index (HDI) which considers three basic dimensions of human development- health (as measured by life expectancy at birth), education and standard of living (as measured by GNP per capita). HDI is a composite measure of human development based upon objective criteria but does not takes into account happiness per se. Happiness is  comprehensive measure of well-being, dependent upon both external and internal factors.

Evolution of Happiness Economics

Past few years have witnessed growing interest in interpreting progress in terms of Happiness. The credit for coining the term ‘National Happiness’ goes to former King of Bhutan, Jigme Singye Wang chuck who dismissed  GDP as a measure of development and  made a case for  taking a holistic view of progress incorporating both economic and non-economic aspects of wellbeing.  Ever since he declared in 1972, “Gross National Happiness is more important than Gross Domestic Product,” the term National Happiness has gained a lot of currency.

Until 1972 there was no formal government policy, anywhere in the world, that placed happiness and well-being as a main criterion for public policy and decision making but now there is a sort Happiness movement. Today happiness is increasingly being considered a proper measure of social progress and the goal of public policy. OECD is committed “to redefine the growth narrative to put people’s well-being at the centre of governments’ efforts.” In fact; the field of Happiness Economics, which tracks well-being, has grown substantially in the past few years. It is a study of the relationship between happiness and various economic and non-economic variables.

Determinants of National Happiness

National Happiness, the collective happiness of a country is a holistic reflection of the general wellbeing of the population based upon subjective and objective factors. Happiness, being both personal and social, is influenced by a number of internal and external factors. Internal factors like genetics, personality traits have a strong influence on happiness but external sources like socio-economic status also have significant impact on people’s overall well-being.

Deducing conclusion about well-being from the piles of happiness economic research, the paper identifies the following determinants of national happiness:

  • GDP and GNP  There is a significant association between GDP and happiness, with citizens in wealthier nations being happier than those in poorer nations. The “Easterlin Paradox” suggests application of diminishing-returns principle which implies that once a developed country crosses a threshold average income, more growth doesn’t increase average reported happiness.
  • Individual income Historically, economists have said that well-being is a simple function of income. However, it has been found that once income reaches the subsistence level, its effectiveness as a generator of well-being is greatly diminished. In 2010, Daniel Kahneman and Angus Deaton found that higher earners generally reported better life satisfaction, but people’s day-to-day emotional well-being only rose with earnings until a threshold annual income of $75,000.
  • Health Both physical and mental health has strong bearing on happiness. Ill health is a major cause of unhappiness.
  • Unemployment.Across most surveys, nothing correlates with unhappiness more than unemployment, except perhaps for bad health. Unemployment makes one miserable. Generally, the well-being of those who are employed is higher than those who are unemployed.
  • Working Hours As workers move from part-time work to full-time work, they’re happier. But as they move from full-time work to too much work, the joy of labor subsides. There seems to be an “inverse U-shaped relationship” between hours worked and self-reported well-being, although the precise figures differ across countries.
  • Inflation makes one pretty unhappy.But its effect is weaker than unemployment. The evidence seems to suggest that a volatile inflation rate decreases well-being.
  • Income inequality Generally speaking, income inequality reduces well-being.
  • Religious diversity National crosssectional data suggest an inverse relationbetween religious diversity and happiness.
  • Relationships Positive social relationships (trust, benevolence) yield happiness. In rich societies, where a rise in income doesn’t equate to an increase in levels of subjective well-being, personal relationships are the determining factors of happiness. Pro-social behaviors: honesty, benevolence, cooperation and trustworthiness promote happiness. Social support in terms of someone to count on in times of need is an important factor influencing happiness.
  • Freedom and control There is a significant correlation between feeling in control of one’s own life and happiness levels. Perceived freedom to make life decisions and the quality of governance are found to be the key drivers for changes in national happiness levels. Democracy and federalism bring well-being to individuals.
  • Sense of corruption in government and business (trust) Findings about the effect of corruption on happiness shows that happiness improves markedly where citizens see a reduction in corruption at the top level of leadership and stronger government performance in fighting corruption.

Thus Happiness is influenced by a host of economic (income, employment), socio-political (education and peace, security) and health (mental and physical) variables. Not only the actual socio- political environment, micro and macro economic conditions but also peoples’ perceptions and feelings have bearing on collective happiness of a nation.

Measurement of Gross National Happiness

Gross National Happiness (also known by the acronym: GNH) is a developing philosophy as well as an “index” which is used to measure the collective happiness in any specific nation. Happiness is typically measured using subjective measures e.g. self-reported surveys in addition to objective measures like lifespan, income, education etc.

Bhutan has the distinction of adopting Gross National Happiness instead of Gross Domestic Product as their main development indicator. The central tenets of Bhutan GNH’s are: “sustainable and equitable socio-economic development; environmental conservation; preservation and promotion of culture; and good governance”. Bhutan’s GNH Index includes 33 indicators in nine domains: psychological well-being, health, time use, education, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards. In 2010, the first nationwide GNH survey was conducted in Bhutan to be followed by another one in 2015.

Not only has the idea of Gross National Happiness (GNH) influenced Bhutan’s economic and social policy but has also captured the imagination of others far beyond its borders. Efforts are under way to measure happiness and well-being in various countries viz New Zealand, South Africa, the UK, and cities and communities in the USA, Canada and Australia.

World Happiness Report

World Happiness Report is published by the United Nations Sustainable Development Solutions Network. In July 2011, the UN General Assembly resolution Happiness: Towards a Holistic Definition of Development urged member countries to measure the happiness of their people and to use the data to help guide public policy.

The first World Happiness Report was released on April 1, 2012 as a foundational text for the UN High Level Meeting: Well-being and Happiness: Defining a New Economic Paradigm. The report outlined the state of world happiness, causes of happiness and misery, and policy implications highlighted by case studies. In 2013, the second World Happiness Report was issued, and since then the happiness reports have been issued on an annual basis with the exception of 2014. In addition to ranking countries on happiness levels, each report contains chapters in which the contributing authors delve deeper into issues relating to happiness.

World Happiness Rankings 2017

World Happiness Report 2017 is based on surveys in 155 countries covering the three years period 2014-2016.  The happiness rankings are based on six factors: GDP per capita, healthy years of life expectancy, social support (as measured by having someone to count on in times of trouble), trust (as measured by a perceived absence of corruption in government and business), perceived freedom to make life decisions, and generosity (as measured by recent donations). Apart from gross domestic product per person, and healthy life expectancy which are measured objectively, the last four factors are based upon global surveys.

Following are the highlights and deductions from the report:

Norway is the world’s happiest country in the world, followed by Denmark, Iceland, Switzerland, Finland, Netherlands, Canada, New Zealand, Australia and Sweden. According to the 2017global ranking, all of the top four countries rank highly on all the main factors found to support happiness: freedom, generosity, honesty, health, income and good governance. In fact, their averages are so close that small changes can re-order the rankings from year to year. The bottom ten countries on the list where people are the unhappiest are Yemen, South Sudan ,Liberia ,Guinea, Togo ,Rwanda, Syria, Tanzania , Burundi and Central African  Republic . (Refer to the map given in the end)

The report also points out that happiness is falling in the USA (ranked 14th, dropping down one spot from last report), primarily due to social causes rather than economic. All the four social variables deteriorated—the US showed less social support, less sense of personal freedom, lower donations, and more perceived corruption of government and business. These are the same factors that explain why the Nordic countries do so much better. .Another major country, China has made major economic strides in recent years but the report finds that its people are not happier than they were 25 years ago,

India is among the worlds saddest nations at 122 rank and became even less happy as the rank has dropped four slots from last year. Strangely India is behind terror-ridden Pakistan and poorest-of-poor Nepal in the global list of the happiest countries. Nations such as China (79), Pakistan (80), Nepal (99), Bangladesh (110), Iraq (117) and Sri Lanka (120) fared better than India on the ranking. India is behind the majority of South Asian Association for Regional Cooperation (SAARC) nations, apart from war-ravaged Afghanistan, that stands at 141.


National Happiness, the collective happiness of a country is a holistic reflection of the general wellbeing of the population dependent upon host of factors. Income is an important determinant of GNH as all the top ten countries in Happiness Ranking are wealthier developed nations but when we compare happiness rankings between the top and bottom ten countries it becomes clear that money/income is not the only ingredient in the recipe for happiness. Three-quarters of the happiness gap in two groups of countries (happiest and saddest) is explained by the six variables, half is due to differences in having someone to count on, generosity, a sense of freedom, and freedom from corruption. The other half of the explained difference is attributed to GDP per capita and healthy life expectancy. Income differences matter more in poorer countries but according to World Happiness Report 2017, among the wealthier countries the difference in happiness levels has a lot to do with “differences in mental health, physical health and personal relationships………..”


(Paper published in ‘HAPPINESS -AN ETERNAL QUEST OF BEING’ published in 2019 by



  • Reports published by the United NationsSustainable Development Solutions Network:
  • 2012/2013/2015/2016/2017 World Happiness Report
  • ‘Happiness: Towards a Holistic Approach to Development’: July 2011 UN General Assembly UN DAG Repository
  • ‘Well-being and Happiness: Defining a New Economic Paradigm’: The Report of the High-Level Meeting on Wellbeing and Happiness. UN Sustainable Development Knowledge Platform
  • Centre for Bhutan Studies and GNH Research website

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