Come On, Get Happy: Money Lessons from the World Happiness Report

Every March, the World Happiness Report is released, compiling and discussing data from the World Gallup Poll to help us understand what drives life satisfaction and emotion.

The 2021 report is notable in that it follows a year in which the worst pandemic in a century raised the worldwide death rate by 3.4% and survivors had substantial mental health fallout.

Apparently, we are a resilient bunch, and our ability to see past the present toward a brighter future helped keep our happiness numbers from plummeting.

That’s just one of many lessons to be gleaned from the latest edition of the World Happiness Report. There are also a number of financial and, dare I say, political implications in understanding what truly makes humans happy.

 

World-Happiness

 

How “Happiness” is Measured

 

Understandably, measuring world happiness is not as simple as conducting a poll, asking people around the world how happy they are. Any individual might report anything from a 1 to 10 depending on what time of day they’re asked and what activity they’re in the midst of or have just completed.

The Gallup World Poll measures happiness with a global survey of people in most nations by asking about both emotional wellbeing as well as life satisfaction.

For the emotional component, positive experiences include laughing, smiling, and learning, or feeling enjoyment, well-rested, and treated with respect.

Negative experiences queried include experiencing physical pain, sadness, worry, stress, and anger.

The life satisfaction component includes questions about one’s current and future life evaluation, with suffering on the low end, struggling in the middle, and thriving on the other end of the spectrum.

All of this data is compiled and analyzed, and cities and countries are ranked on various metrics for the current year and for a composite of the most recent three years’ worth of polling.

What have we learned from all of this polling and number-crunching?

 

Nordic Countries are Happy

 

The 5 Nordic countries all landed among the Top 7 spots for the 2021 Happiness Report Ranking.

Number 1 is Finland, followed by #2 Denmark, then #4 Iceland, with #6 Norway and #7 Sweden.

Neighboring countries #3 Switzlerland and #5 Netherlands fill in the gaps.

 

World_Happiness
credit: 2021 world happiness report

 

How is it that these cool-climate countries report such a strong life satisfaction despite their proximity (and in some cases, presence within) the arctic circle?

The World Happiness Report has found 6 common predictors of strong scores amongst citizens:

GDP per capita, social support, healthy life expectancy, freedom to make life choices, generosity, and [low levels of] corruption. The Nordic countries (which are the Scandinavian countries plus Iceland (and Finland if you don’t count Finland as Scandinavian)) score quite well on all six metrics.

Paying lots of taxes never makes me happy, but the high tax rates in these countries contribute to both a low level of income inequality and a strong social support net. Nordic people tend to exhibit a high level of trust in both their governments and fellow citizens.

 

Superpowers are Not the Happiest

 

The world’s leading economic engines are not home to the world’s happiest people.

Based on Gross Domestic Product, these are the largest economies ordered by size, with their happiness rank on the right.

 

      1. United States #19
      2. China #84
      3. Japan #56
      4. Germany #13
      5. India #139
      6. United Kingdom #17
      7. France #21
      8. Italy #28
      9. Brazil #35
      10. Canada #14

 

There’s not a Top 10 Happiest country among the bunch, and more than half are outside the Top 20.

 

Is GDP Per Capita a Better Indicator of Happiness?

 

The 2 lowest ranking countries in the top 10 for total GDP both have more than 1 billion citizens, and their GDP per capita is obviously far lower than numerous industrialized nations. We already know that the per capita GDP is a top indicator.

Perhaps, then, we should look at the top economies based on GDP per capita and the reported life satisfaction scores. Using World Bank Data and listing sovereign entities with a Happiness Report Ranking, we get:

      1. Luxembourg #8
      2. Singapore #32
      3. Ireland #15
      4. Switzerland #3
      5. United Arab Emirates #25
      6. Norway #6
      7. United States #19
      8. Hong Kong #77
      9. Denmark #2
      10. Iceland #4

 

With this list, we do see some strong overlap between the Top 10, with half of the countries in the Top 10 for GDP per capita also ranking in the Top 10 for happiness. We also see some outliers with Singapore at #32 and Hong Kong at #77.

A theme that stood out to me when reviewing the rankings is the relatively low Happiness Report Rankings for many Asian nations. The Asian Century Institute took a closer look at this phenomenon and found that Asian citizens ranked poorly for 2 of 3 key well-being indicators. These were having a “sense of purpose” and social well-being, or having adequate supportive relationships and love in one’s life. In the third metric, financial well-being, Asian countries were collectively closer to the world average, although there are obviously wide variations among nations.

 

Economic Freedom and Happiness

 

In studying physician burnout, I’ve learned that career satisfaction is defined as much or more by autonomy as it is by compensation. Could it be that a country’s economic freedom is a better predictor of happiness than its economic wealth?

To better answer that question, I looked at the Heritage.org Economic Freedom Rankings alongside their Happiness Report Rankings.

Here are the Top 10 nations on the Economic Freedom Index, followed by their Happiness Ranking.

 

      1. Singapore #32
      2. New Zealand #9
      3. Australia #11
      4. Switzerland #3
      5. Ireland #15
      6. Taiwan #24
      7. United Kingdom #17
      8. Estonia #40
      9. Canada #14
      10. Denmark #2

 

I’d say the correlation is fairly strong, with the 2 of the 3 happiest countries being among the most economically free. The “unhappiest” country in the list is Estonia at #40 and 8 of the 10 most economically free countries are among the 25 happiest countries.

You may notice, though, that only one of the Nordic countries made the list of the most economically free, with Denmark sneaking in at #10.

To understand why that is, it’s important to understand Heritage.org’s definition of economic freedom:

 

“Economic freedom is the fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please. In economically free societies, governments allow labor, capital, and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.”

 

The larger the government and the more extensive and expensive its programs, the lower the Economic Freedom score will be. However, the Nordic nations do score quite well on other indicators like rule of law, regulatory efficiency, and open markets.

 

How do the Top 10 Happiest Countries rank in Economic Freedom? Here, I’ve taken the rank of Happiest countries in order accompanied by their Economic Freedom Index scores.

 

      1. Finland #17
      2. Denmark #10
      3. Switzerland #4
      4. Iceland #11
      5. Netherlands #16
      6. Norway #28
      7. Sweden #21
      8. Luxembourg #18
      9. New Zealand #2
      10. Austria #25

 

Again, we see a fairly strong correlation between happiness and measured Economic Freedom. The happiest countries all rank in the top 30. The United States, ranking 19th in Happiness, ranked 20th in Economic Freedom. That lines up pretty well.

 

 

The United States Remains Among the Top 20 Happiest Nations

 

I don’t know know if this is something to celebrate or be concerned about. My home country barely made the Top 20 (at #19) but out of about 150 nations, that’s actually not bad.

The 2019 World Happiness Report, conducted pre-pandemic, explored some of the reasons for America’s good-but-not-great and declining levels of happiness.

 

“This decline in happiness and mental health seems paradoxical. By most accounts, Americans should be happier now than ever. The violent crime rate is low, as is the unemployment rate. Income per capita has steadily grown over the last few decades. This is the Easterlin paradox: As the standard of living improves, so should happiness – but it has not.”

 

The authors point to increasing rates of addiction and obesity, decreasing social support, and the rise of digital media. Face-to-face communication and interaction are being replaced more and more by electronic or virtual means, and it’s simply not the same.

The speed of that transition to more impersonal communication was catalyzed by COVID. At the same time, we’re seeing declining happiness and increasing mental health problems. While correlation is not causation, it’s hard to imagine that the loss of in-person socializing isn’t taking some toll on our collective well-being.

Still, these issues are not unique to the United States, and we do enjoy many freedoms and economic opportunities that keep us ranking relatively well on the happiness scale, even if we are ranking just behind Costa Rica and the Czech Republic in the latest report.

 

Related content: Happiness is an Early Retirement

 

Trust and Happiness Go Hand in Hand

 

Two questions that carry a great amount of weight in determining one’s life satisfaction have to do with trusting one’s institutions and fellow citizens.

The data shows that people reporting it to be “very likely” that a lost wallet with $200 in it would be returned to them if found by the police or a passerby have life satisfaction scores (on a 10-point scale) about 0.45 and 0.62 points higher than those who do not.

Doubling of one’s income only increases life satisfaction by 0.20 points.

Reporting a very high likelihood of being harmed by violent crime lowers the score by an average of 0.23 points, and being unemployed lowers the score by 0.43 points.

The point of these data and the graph below is the fact that having trust in your institutions and neighbors has a profoundly positive impact on your happiness.

 

World_Happiness_Benevolence
credit: 2021 world happiness report

 

 

COVID Changed Our Moods, But Not Our Outlook

 

The timing of the United Kingdom data collection allowed researchers to see that moods declined rapidly with lockdowns, but also bounced back rapidly.

The world data for 2020 somewhat surprisingly showed no dropoff in positive emotions, but there was approximately a 10% increase in negative emotions of worry and sadness.

Despite the difficult days we all had, our evaluations of our current lives and future expectations didn’t change much at all. If you examine the 2020 scores for live evaluation, the Top 20 nations had scores ranging from 6.714 to 7.889 on a 10-point scale.

The Top 20 scores for the 2017 to 2019 years averaged 6.664 to 7.809. We have had some down days, but we anticipate better days ahead.

 

Some Countries Fared Better With the Pandemic than Others

 

The 2021 report focused on the theme that dominated the year in which the survey was conducted, namely COVID-19.

Obviously, pandemic testing, reporting, policies, and compliance were all over the map, both figuratively and literally. Nevertheless, it is apparent that certain countries, including my own United States, did not fare so well.

The researchers suggested that a number of factors were at play. For example, “A lack of sufficient scientific knowledge among the populations of the North Atlantic countries has also contributed to the failure of effective pandemic control due to the public’s lack of understanding of the epidemiology of the pandemic and susceptibility to false information and fake news.”

As a student of science and Facebook friend to those who are not, I can attest affirmatively to that statement.

They also claim that the “more individualistic culture of the North Atlantic countries compared to countries in the Asia-Pacific region and the relative looseness of social norms may also have contributed to lower public support for non-pharmaceutical interventions.”

I appreciate that they didn’t point specifically to ‘Merica, but rather to the more generalized “North Atlantic countries,” but I think we all know in whose direction the finger is pointed. Sadly, rightfully so.

 

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We are Social Creatures

 

For good reason, we experienced more sadness and worry in 2020 amidst the pandemic. We also were disconnected from our usual social circles and habits, and this also affected the population asymmetrically.

The more one’s feelings of connectedness to others decreased due to the pandemic, the more happiness fell, as well. We rely on one another to provide the ingredients that make up a happy life.

The report found that a number of factors helped increase one’s sense of connectedness. If you’ve read up on happiness before, these factors that help create “connectedness” should be familiar as those also associated with happiness.

These are the expression of gratitude, possessing “grit,” volunteering time or money, exercising, having a pet, and activities that provided “flow,” or deep work.

It’s important to be connected to others, and 2020 made that more difficult than ever. As the world opens up more in 2021, do what you can to reconnect with friends and family that you’ve been separated from.

 

Politics and Happiness

 

I hesitate to bring this up. I tend not to discuss politics much on this site or in real life. Doing so is a great way to lose friends and readers, and I don’t have strong leanings either way.

Twenty-some years ago, a good friend inquired about my politics, and I recall answering that I might lean a little more this way than that, but that I don’t feel very strongly or care a great deal about the outcome of any particular election.

Why? Because there are places in the world that do things so much differently than either party here in America would ever consider, and the people in many of those places seem to be pretty content. Their countries are not imploding nor are its people’s lives falling apart despite vast differences in the way things are run.

When you look over the list of the happiest and least happy countries, it is apparent that freedom, fairness, and autonomy play significant roles. Repressed people under authoritarian regimes do not fare well.

However, among the relatively fair and free nations that rank above the U.S. in the Happiness Report Rankings, there is no single style of governance that dominates. You’ve got the economic freedom of Australia and New Zealand right alongside the democratic socialism of the Nordic nations, and all are among the happiest people in the world.

I’ve always felt that we tend to overestimate the role of politics and policies in determining our own personal levels of happiness, and the results of a report like this one bears this out. There are plenty of happy people in nations that lean right, left, up, down, forward, and backward. Well, maybe not backward, but you get my drift. The fiercely politically driven people I know are not among the happiest.

 

How to Be Happy

 

Just as we study personal finance because we want to attain some level of wealth, we study happiness because we want to be happy. Take what you’ve learned here or from the in-depth World Happiness Reports and apply them to your own life.

 

Be grateful. Remind yourself of the many things you have to be thankful for.

 

Connect with your fellow man and woman. We are social creatures and were meant to spend time with one another. To the extent that public health measures allow, reconnect with the people you enjoy spending time with (and don’t waste time on those who bring you no joy).

 

Keep learning. I was surprised to see “learning” right up there with smiling, laughing, feeling well-rested, and being treated with respect. It makes sense, though. When we learn, we grow and have a stronger sense of self-worth.

 

Accept that you won’t always be happy. It’s been said that happiness is found in the gap between reality and expectations. If you expect the best, you’ll usually be disappointed. Be cautiously optimistic, but leave room to be pleasantly surprised.

 

Be trusting. This isn’t an easy command to follow, but a lack of trust has played a pivotal role in our uniquely American outcomes in this pandemic. Feeling that you can trust your institutions and neighbors has a tremendous impact on well-being. It obviously helps to have trustworthy people around you.

 

Be Scandinavian. Only kidding, of course. But, hey, it’s worked well for me!

 

 

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What are the key determinants of your happiness? What have you done to increase your personal life satisfaction?

 

19 thoughts on “Come On, Get Happy: Money Lessons from the World Happiness Report”

  1. Do you know why your ancestors left their countries to come to the U.S.? I wonder why my Swiss great-grandfather and my Irish great-grandmother came in the mid-19th century to this country. They married here and farmed. They left few, if any, records. But presumably, they were unhappy in their countries of origin; now those countries are among the world’s happiest.

    Reply
    • I’m 4th to 5th generation, so I don’t have all the Intel, but presumably my ancestors came here to the Midwest in search of a better life.

      I had the pleasure of spending 6 weeks in Stockholm as a medical student. I will say that it seemed to be a happy place, despite the high costs of just about everything.

      Cheers!
      -PoF

      Reply
      • Here’s a thought exercise: A friend who is 2nd generation cites the fact that his second-born father came to the US because in his Scandanavian country of origin, the entire farm is traditionally left to the first-born son and all other siblings are left to their own devices.

        Perhaps there’s a bias reflected in the data- the happiest faction who remain in the home country are likely to be those who inherit parental wealth, in which case “happy” equates with “rich.”

        Those offspring needing to fend for themselves immigrate to the US, where the strivers start out with a happiness (again, interchangeable with “wealth”) deficit.

        Those who depart due so of necessity, while those who remain have the luxury of staying.

        In which case you, PoF, truly represent your ancestors’ wildest dreams.

        Fondly,

        CD

        Reply
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  3. I love your last slide about ethnicity. Infant predisposition are highly correlated with future happiness. So it appears there is a genetic predisposition that is quite significant.
    Also ethnically diverse populations trust each other les and are more stratified socioeconomically and are less happy. I wonder how that factors in to the United States situation?

    Reply
  4. Great breakdown overall. I especially enjoyed the ending bit about how to actually be happy. Ultimately it is all about making sure that your expectations are in line with reality. If you don’t expect/demand things to be a certain way, then it is easier to be happy with what you have as it is now. I certainly have found that keeping a gratitude journal Top 3 moments of the day is a useful tool, and my happiest days are simply being around family, eating good meals, and doing something productive and/or new.

    Reply
  5. One thing that would be hard to quantify in this kind of a survey is a country’s cultural approach towards work and life, and that ay have a significant impact on the scores.

    I spent quite a bit of time in Sweden (#7 on the happiness index, for example), and the one thing I remember most there was how strongly the “work life balance” swung towards “life” rather than “work.” The idea of non-compensated overtime was just not a thing there – if the end of the day comes and all the work isn’t done, they put it aside and save it until the next day. If a project runs late because of that – well, it just runs late. No one brags about how many hours they are putting in. Stores and professional services tend to open late and close early, especially on the weekends. And of course, removing someone from their job is very difficult, and the social safety net is pretty strong. (Of course, they pay for this in taxes – nothing is free.)

    Maybe some lessons here for us FIRE folks? Definitely seems like a possible relationship between the need to work (especially beyond normal hours) and how happy you are 🙂

    Reply
  6. I like the in-depth breakdown of the study. I don’t think the United States is really focused on people’s happiness as much as some of the European countries are. They are more focused on getting more stuff and getting the newest gadget for their own life.

    I don’t think we’ll ever get there as a country but that doesn’t mean we can’t individually take choices to be individually happy. Great highlights and something to be mindful of when going through everything!

    Reply
  7. I’m actually surprised the US ranks as highly as it does. We have it pretty good here, but the negatives dominate the headlines and give you the impression that everyone is miserable all the time. Certainly there are things we need to fix, but all in all it ain’t so bad.

    Reply
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  9. I know many of the readers expect GDP and economy are linked to happiness, and they may be linked if governance meets their expectations. I would be much happier giving in areas where I feel things are not corrupt. Scandinavian countries are primarily filled with Scandinavians who have common goals, but as that begins to change, I predict that happiness will begin to decline. If everyone works and contributes there is perceived fairness and happiness. If the general population starts to game the system to find wealth without work happiness will decline.

    Reply

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