Measuring the Macroeconomy and Human Happiness

Chapter 2
Measuring the Macroeconomy and Human Happiness
The welfare of a nation can …scarcely be inferred from a measure of .
Simon Kuznets (1934)
tions has issued a World Happiness Report that ranks
the World’s countries by how happy and satisfied
with life its citizens claim to be. The rankings are ba-
sed on the results of surveys that directly ask citizens
to assess their satisfaction with life in their respective
countries. In 2020, Finland ranked as the happiest
country, the third straight year it headed the list. Does
this highest level of happiness also imply that Fin-
land’s economy is the best-performing economy in
the world? According to data shown in Table 2.1 on
the right, when we look at the measure called Gross
Domestic Product, or GDP, the people of Luxem-
bourg are, on average, the richest on the planet. But,
according to the United Nations happiness rankings
shown in Table 2.2, Luxembourg is only the tenth-
happiest country. Why is Finland so happy when
average per capita is only the 14th-highest?
There are many discrepancies between Tabes 2.1
and 2.2. For example, the United States has the fifth-
highest GDP per capita, but in terms of happiness it is
ranked 18th. And, Qatar, the ninth-richest country is
not even among the top 25 happiest countries.
No doubt, you can think of many reasons why the
dollar value of average national production and the
level of happiness do not exactly match. Think of the
popular saying: “Money cannot buy happiness.” That
is probably true. On the other hand, these measures of
happiness and production may simply not be very
accurate. This chapter examines measures of human
well-being and economic performance that econo-
mists and policymakers use to asses our economy and
to judge the effectiveness of macroeconomic policies.
Table 2.1 – Gross Domestic Product
per capita, 2020; IMF data.Table 2.2 – Rankings from the 2020 World Happiness : The Top 25 and Bottom 10.