Does increasing wealth lead to greater happiness?

How do we measure happiness, and which country was the first to introduce happiness measurement?

In economic practice, there is an indicator specifically designed to measure happiness. The first country in the world to introduce the Gross National Happiness (GNH) index was the Kingdom of Bhutan in 1972, emphasizing that happiness has measurable value. Even then, it was recognized that Gross Domestic Product (GDP)— which represents the total value of goods and services produced within a national economy — was not a sufficient indicator of a country’s success.

It is important to distinguish GDP from Gross National Product (GNP), which measures the total value of goods and services produced by a nation’s residents, both domestically and abroad.

The Kingdom of Bhutan pioneered the idea that the following components of Gross National Happiness are more significant indicators of a country’s wealth than mere income:

• Psychological well-being
• Time use and work-life balance
• Community vitality
• Cultural diversity and preservation
• Ecological resilience
• Living standards
• Health
• Education
• Good governance.

These factors highlight that true prosperity goes beyond financial gains. After all, what is the value of wealth if the soul remains empty and unfulfilled? But this raises an important question: Should modern economies redefine success by prioritizing well-being over material wealth?

The link between income and happiness: What economists say

Prominent economists, such as Richard Layard, have extensively studied the relationship between income and happiness. Their research indicates that while an increase in a country’s average salary contributes to higher levels of happiness, this effect diminishes once a certain income threshold is reached.

In other words, additional income growth does not lead to a proportional increase in overall life satisfaction. This means that once the majority of the population overcomes extreme poverty and secures basic necessities such as access to food, education, and healthcare, further income growth has a limited impact on their overall happiness.

What factors influence happiness beyond money, and what are the main drivers of dissatisfaction?

Studies have shown that Western economies are becoming wealthier, yet their citizens are increasingly unhappy. Financial security alone is not the sole factor that shapes a person’s happiness.

Renowned economist Richard Layard identifies seven key factors that influence happiness:

• Family relationships
• Financial situation
• Work and career
• Friends and broader community
• Health
• Personal freedom
• Alignment with personal values.

On the other hand, high divorce rates, unemployment levels, and the quality of government governance are among the most significant contributors to public dissatisfaction.

The United Nations introduces the World Happiness Report

In 2012, the United Nations, at the initiative of the Kingdom of Bhutan, introduced the Global Happiness Report, which is published every year on March 20th, the International Day of Happiness.

This report ranks 147 countries based on the subjective assessments of respondents regarding the following factors:

• Positive emotions – laughter, enjoyment, and interest
• Negative emotions – worry, sadness, and anger
• Benevolence – donating, volunteering, helping strangers, and returning a lost wallet.

And other factors identified as influencing happiness:

• GDP per capita
• Social support
• Healthy Life expectancy
• Freedom to make life choices
• Generosity
• Perception of corruption.

Country rankings in the 2025 World Happiness Report

• According to the 2025 World Happiness Report, Finland ranks first out of 147 countries, while Afghanistan is at the bottom of the list.
• Serbia has risen from 37th to 31st position compared to the previous year, which is its highest ranking.
• France (33rd), Spain (38th), Italy (40th), and Japan (55th) are ranked lower than Serbia.
• Germany is in 22nd place, while the United Kingdom and the United States are in 23rd and 24th places, respectively.
• Slovenia holds the 19th position, Bosnia and Herzegovina is at 56th, Montenegro is ranked 71st, Croatia is 72nd, and North Macedonia occupies 86th place.

Top 10 happiest countries according to the 2025 World Happiness Report:

What is interesting is that the Kingdom of Bhutan does not appear on this list, and its ranking in terms of happiness is not mentioned. Additionally, it is quite interesting that self-proclaimed state Kosovo ranks 29th, considering it still faces serious challenges such as high unemployment, underdeveloped infrastructure, political instability, widespread corruption, and limited access to quality public services like education and healthcare.

What makes Nordic countries consistently rank among the happiest?

From personal experience, after six months of living in Norway – a country ranked among the top 10 happiest countries in the world – I gained the impression that the high level of trust in the community is a result of effective governance. Norway is characterized by exceptional infrastructure, organized public transport, and strong government support through social programs, healthcare, education, and the social security system. These factors contribute to achieving a high level of well-being and social justice, often earning the country recognition as an example of a perfect society.

On the other hand, although Norway regularly ranks high in global happiness indexes, certain challenges remain overlooked in these rankings. Social inclusion and mental health issues, including the suicide rate, are negative factors that highlight the need for further attention.

What should governments do to increase the happiness of their citizens?

In 2016, the United Arab Emirates established the Ministry of Happiness and Wellbeing with the goal of enhancing the quality of life of its citizens. The ministry focuses on promoting positive thinking, creating policies that support the wellbeing of the population, and building a society based on satisfaction, balance, and productivity. Through various initiatives – from mental health programs to employee support in both the public and private sectors – the UAE sends a clear message that economic development must go hand in hand with the happiness and wellbeing of its people.

If we consider the empirical facts that a person’s happiness depends on many factors, not just earned money and the economic progress of a country measured by GDP, governments should create an environment where the individual is at the center of attention – where their emotional, social, and spiritual well-being is equally valued as economic development. This should include supporting policies that promote the quality of life and the environment, mental health, education, and mutual connections within the community. By integrating these elements into development strategies, society can achieve more sustainable and comprehensive progress in terms of overall satisfaction and quality of life.

Countries should introduce mandatory practices like the Kingdom of Bhutan & UAE and incorporate happiness indicators as one of the fundamental measures of a country’s success and national prosperity. In this way, perhaps the capitalist system could be replaced by a new one where the size of one’s wallet is no longer a reflection of an individual’s power, success, and strength.