Happiness and Prosperity and the Equation that Links the Two

Happiness or Prosperity. How can we tell if a country is happy? Does it matter?

When I came across the Telegraph.co.uk article on the ‘Happiness’ Index for countries, I was intrigued. I clicked on the link and began clicking through the pictures ever so quickly with intermittent smiles. Then somewhere near number 5, I realised the title had changed to ‘Prosperity’. In an effort to sort out my confusion, I returned to the introductory page. Ahh, the “touchy-feely” term ‘Happiness’ had been replaced by the London think tank conducting the study for the more reputable term ‘Prosperity’. As an American, I had to giggle. Truly this is an important study and to be trusted and respected, it needed to have a proper name, not one filled with the dreams, rose-coloured (or colored) glasses and drops of a half-full glass.

So, how are happiness a.k.a. prosperity indexes determined? In Economics, we are used to analysing (or analyzing) various indicators of macroeconomic performance including Real GDP, CPI, RPI and trade balance by looking at various determinants. We try to devise quantitative methods to complete our analysis and evaluation. So, what are the indicators and determinants of Happiness? This particular study had “89 variables placed in eight categories: economy, entrepreneurship, governance, education, health, safety, personal freedom and social capital”. These seemed to cover the wide-range of social phenomenon that determines quality of life for people in a society.

How did we rank? Well, the UK might need to work a little harder on smiling. Perhaps, the Irish political blogger Guido Fawkes’ ‘Misery Index’ is a reality check, but certainly is not the positive attitude the UK needs to embrace to make the top ten next year. As an American, I was very proud of our ranking, but had the biggest smile over the picture for the country ranked number 3. Awwww.

Telegraph’s Happiness (Prosperity) Index