What is Happiness Economics?
Happiness economics is a study that uses econometric analysis to measure the relationship between individual satisfaction and economic issues. The factors that are measured in happiness economics include economic security, quality of work, quality of consumption, leisure time, relationships, environment, and freedom and control.
Econometric analysis is the application of mathematical, statistical, and economic data that is used to make inferences on economic relationships. In regard to happiness economics, econometric analysis is used to discover the factors that increase and decrease the quality of life and an individual’s well-being. Determining an individual’s well-being is not an easy task because the measurement of happiness can be subjective.
- Happiness economics is a study that examines relationships between individual satisfaction and economic issues. It is measured through surveys that require participants to rank their level of happiness based on an assortment of quality-of-life factors.
- Bhutan’s gross national happiness index is an economic metric that is used quite frequently by people who study happiness economics.
- Finland ranks the highest on the 2019 gross national happiness index, while South Sudan is ranked the lowest.
How is Happiness Economics Measured?
Individuals who study happiness economics conduct annual surveys that ask participants to rank their level of happiness based on an assortment of quality-of-life factors. For example, the survey asks participants to rank their level of happiness (scale of 1-10) on factors such as their countries’ political freedom, health care, and education. Once the responses are collected, they are examined and analyzed, resulting in a score that measures the overall happiness of a demographic.
Bhutan’s Gross National Happiness Index
Bhutan’s gross national happiness index is a measurement of economic and moral progress that focuses primarily on an assortment of quality-of-life factors. In total, nine quality-of-life factors are measured to help determine a nation’s gross national happiness. The nine quality-of-life factors are listed below:
- Use of time
- Psychological well-being
- Good governance
- Cultural diversity and resilience
- Ecological diversity and resilience
- Community vitality
- Living standards
Conducted through surveys, the nine quality-of-life factors listed above allow for an accurate measurement of a demographic’s overall happiness. In the study of happiness economics, Bhutan’s gross national happiness index is significant.
The Happiest Countries in the World
Based on the gross national happiness index of 2019, below are the top 10 happiest countries in the world (and their respective happiness scores):
1) Finland (7.769)
2) Denmark (7.600)
3) Norway (7.554)
4) Iceland (7.494)
5) The Netherlands (7.488)
6) Switzerland (7.480)
7) Sweden (7.343)
8) New Zealand (7.307)
9) Canada (7.278)
10) Austria (7.246)
As the list shows, most of the countries in the top 10 are located in Europe –80%, to be exact. This is due to efficient health care systems, minimized corruption, high employment, and an overall higher standard of living compared to other parts of the world.
The Least Happy Countries in the World
Based on the 2019 metric, below are the 10 countries that rank the lowest on the gross national happiness index (and their respective happiness scores):
147) Haiti (3.597)
148) Botswana (3.488)
149) Syria (3.462)
150) Malawi (3.410)
151) Yemen (3.380)
152) Rwanda (3.334)
153) Tanzania (3.231)
154) Afghanistan (3.203)
155) Central African Republic (3.083)
156) South Sudan (2.583)
As shown, the list is primarily comprised of African and Middle Eastern countries. It is because African and Middle Eastern countries are plagued with war, poverty, corruption, and social inequality.
The Organization for Economic Cooperation and Development (OECD)
The Organization for Economic Cooperation and Development (OECD) is a group consisting of 37 democratic nations that discuss and develop social and economic policies. The OECD gathers happiness economics data of the 37 member nations and ranks their countries based on factors such as education, employment, health, housing, and income.
As a point of reference, the top 10 countries in the gross national happiness index are all members of the OECD.
CFI is the official provider of the Certified Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst.
To keep learning and developing your knowledge of financial analysis, we highly recommend the additional resources below: