What Makes the World’s Happiest Country Happy?

Once again, Norway was named the World's Happiest Country.

Once again, Norway was named the World's Happiest Country.

Forbes magazine has released its annual ranking of the world’s happiest countries, using data compiled from the Legatum Institute’s annual prosperity index. The prosperity index is an effort to rank countries based on wealth, freedom, security, life satisfaction, and so on. As in years past, Norway topped the list.

While interesting in their own right, these sorts of indices also provide some interesting insights into broader questions of economic and political development.  In most studies, gross domestic product (GDP) per capita [glossary] is the proxy measure of development. The higher the GDP per capita, in other words, the more developed a country is. With its 2010 GDP per capita of approximately $47,000, the United States is relatively more developed than South Korea, with a GDP per capita of approximately $20,000. South Korea, in turn, is considerably more developed than Haiti, which has a GDP per capita of approximately $650. Indeed, the World Bank and other international institutions regularly categorize countries using GDP per capita. Thus, for World Bank lending purposes, maintains four categories of countries: low income countries, with GDPs per capita of less than $996, lower-middle income countries, with GDPs per capita between $996 and $3,945, upper-middle-income countries, with GDPs per capita between $3,946 and $12,195, and high income countries, with GDPs per capita of more than $12,195.

But while we use GDP per capita as a proxy for “development,” the figures often tell us very little about what is actually going on in a specific country. Further, while we generally operationalize development as an increase in GDP per capita, an increase in GDP per capita may or may not actually result in an improvement in the quality of life or life chances in a given country. This is where other figures and indices come in. The Human Development Index, the Gender Empowerment Measure, and Happy Planet Index, even more specific measures like life expectancy, child mortality, or literacy rates can tell us a great deal about what is going on within a specific country.

One interesting comparison is to look at the top ten countries in the various measurements. Let’s take GDP per capita and human development.

According to the IMF, the ten wealthiest countries in the word in 2010 were:

  1. Luxembourg $104,390
  2. Norway $84,543
  3. Qatar $74,422
  4. Switzerland $67,074
  5. Denmark $55,113
  6. Australia $54,869
  7. Sweden $47,667
  8. The United Arab Emirates $47,406
  9. The United States $47,132
  10. The Netherlands $46,418

If we compare this to the top ten countries in the UNDP’s 2010 Human Development Index, which is a composite index which incorporates health, education, and wealth, we see some interesting shifts. The top ten rankings for the HDI are:

  1. Norway
  2. Australia
  3. New Zealand
  4. The United States
  5. Ireland
  6. Liechtenstein
  7. The Netherlands
  8. Canada
  9. Sweden
  10. Germany

Some countries, in other words, overperform relative to the size of their economies, while others tend to underform. Ireland, for example, moves up 7 spaces (from 12th largest economy to 5th best ranking in the HDI), while Germany improves 9 positions (from 19th to 10th). At the other end of the scale, Qatar and the United Arab Emirates experience a sharp drop in their rankings, falling from 3rd and 8th to 38th and 32nd respectively.

And where things get really interesting is when the various measures diverge greatly. When we’re looking at measures which incorporate concrete variables, such as infant mortality rates, literacy rates, or access to education, explanations can be relatively straightforward. One could make a strong case, I think, that the reason that Qatar and the UAE fall so sharply in their standings is because they have not been successful in converting the oil wealth both countries enjoy into social and health benefits for the country’s population as a whole.

But when we get into the fuzzy area of happiness and life satisfaction, things become much murkier. According to the Legatum Institute’s study, the world’s ten happiest countries are:

  1.  Norway
  2. Denmark
  3. Finland
  4. Australia
  5. New Zealand
  6. Sweden
  7. Canada
  8. Switzerland
  9. The Netherlands
  10. The United States

Money, in other words, helps but it doesn’t buy happiness. Wealth is certainly part of the picture—we don’t see very poor countries cracking the top of the charts. But size, trust and social cohesion, and extensive redistribution of wealth, also appear to play a role. Food for thought in development studies.

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