The Economics of Happiness: Where the U.S. Ranks
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The Fiscal Times
April 5, 2012

Feeling blue? Maybe relocating to Denmark would help. 

The Scandinavian nation came out on top of a new ranking of global moods. Finland, Norway, the Netherlands and Canada rounded out the top five countries in a “World Happiness Report” published by The Earth Institute of Columbia University and released this week as part of a United Nations conference to discuss the idea of a new economic paradigm based on public well-being.

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The “life evaluation scores” used in the report are based on responses from the Gallup World Poll, which annually surveys people aged 15 and older in more than 150 countries and asks them to rate the quality of their lives from zero to 10. While Northern European countries dominate the top of the list, the United States comes in 11th, behind Australia and Ireland but ahead of Austria, Israel, the U.K. and France. (Puerto Rico, a U.S. territory, was broken out separately and ranked 27th.) 

The very bottom of the rankings includes a cluster of poor countries from sub-Saharan Africa. Togo is the least happy country on the planet, followed by Benin, Central African Republic, Sierra Leone and Burundi.

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The rankings make clear that richer countries do tend to be happier – but the relationship is not quite that simple. Economist Richard Easterlin famously found that within any given society, richer people tend to be happier, and a rise from the depths of poverty can make a difference in life satisfaction. Yet once certain overall income levels are reached, people pay more attention to their standard of living compared to those around them. In the United States, for example, the overall levels of happiness people report have not grown significantly in recent decades despite tremendous economic growth and technological change.

On the individual level, factors like mental and physical health; job satisfaction and security (not just high pay); and stability of family life are key. As economist Jeffrey Sachs notes in his introduction to the World Happiness Report:

“A household’s income counts for life satisfaction, but only in a limited way. Other things matter more: community trust, mental and physical health, and the quality of governance and rule of law. Raising incomes can raise happiness, especially in poor societies, but fostering cooperation and community can do even more, especially in rich societies that have a low marginal utility of income. It is no accident that the happiest countries in the world tend to be high-income countries that also have a high degree of social equality, trust, and quality of governance.”

Executive Editor Yuval Rosenberg oversees coverage of business, the economy, technology and Wall Street. A former web editor at WNYC, Fortune and Newsweek, he also writes on a wide range of subjects.