The Easterlin Paradox, formulated by Richard Easterlin formulated in 1974, describes the evident contradiction between increased national wealth and increased average happiness levels. While individuals with higher incomes tend to report higher happiness levels within a specific time frame, a country’s average happiness does not necessarily increase over time as its overall income grows.  We apply common corelation between accumulated wealth and happiness.  People with higher incomes tend to be happier than those with lower incomes.

Despite the positive correlation within a point in time, the average happiness levels in a country do not consistently increase as the country’s overall income rises. This is the paradoxical part: while individuals may be happier at higher income levels, the overall happiness level of a country doesn’t necessarily follow fit as the country’s income grows. 

Richard Easterlin, then professor of economics at the University of Pennsylvania is the first economist to study happiness data. The paradox states that at a point in time happiness varies directly with income both among and within nations, but over time happiness does not trend upward as income continues to grow. Higher incomes don’t produce greater happiness over time. One explanation is that one’s happiness depends on a variety of other factors such as family and social connect, pollution less environment, hobbies of life, sufficient food, get together with friends etc.

In the short run, everyone perceives increases in income to be correlated with happiness and tries to increase their incomes. However, in the long run, this proves to be an illusion, since everyone’s efforts to raise standards of living lead to increasing averages, leaving everyone in the same place in terms of relative income. Various theories have been advanced to explain the paradox, but the paradox itself is solely an empirical theory. The existence of the paradox has been strongly disputed by other researchers.

Richard Easterlin has updated the evidence and description of the paradox over time. His most recent contribution is from 2022. This article is corelation between Easterlin’s Paradox and happiness index.  

According to the World Happiness Report and various other sources, Finland is consistently ranked as the happiest country in the world. In the 2025 report, Finland has been ranked number one for the eighth year in a row. Possibly, this happiness comes because Finns enjoy simple pleasures like clean air, pure water and walking around the woods, they enjoy their lives to the fullest. They enjoy a calm and peaceful life. it’s their appreciation for how things work and the ability to pause and admire the little things in life. In Finland, anyone can pick berries, collect mushrooms or fish with a simple fishing rod. It is part of  each citizen’s rights, which state that everyone is free to enjoy nature responsibly. Finland is cleanest in the world. The food that grows wild is delicious and fresh. Finding the luxury produce in the wild  like porcini mushrooms or cloud berries is considered a delightful moment and makes for an even more heavenly dinner. Finnish happiness is explained by the high levels of trust and freedom in its society, which research shows contributes to well-being and productivity.

In the 2025 World Happiness Report, Afghanistan consistently ranks as the unhappiest country in the world. Specifically, in the 2025 report, it is ranked 147th out of 147 countries. This ranking indicates that Afghanistan has the lowest happiness score and experiences the most frequent negative emotions, as well as the lowest frequency of positive emotions. 

The World Happiness Index Report is an annual publication of the United Nations Sustainable Development Solutions Network which contains rankings of national happiness and analysis of the data from various perspectives. The first World Happiness Report was released in April 2012. In a high-level meeting of UN well-being and Happiness were defined as new economic paradigms which drew international attention.

An Internet report suggested that if you want happiness, buy a scarf and gloves and head to Norway to experience real happiness.  Norway is well-known for its good public services and political stability. Denmark is another country which is famous for happiness nurtured in its culture. Danes have a stable government, little public corruption, and access to high-quality education and health care. The country does have the highest taxes in the world, but the citizens happily pay the taxes because they believe higher taxes can create a better society. Let’s understand what Happiness Index is.

What makes people of a country happy? Is it economy? Is it environment? Is it education? Is it government policies? We’ll all of these do contribute to people’s happiness in a country. But it is not necessary to be higher economic pace and growth always. People are happier when they don’t experience inequality in distribution of wealth; people don’t mind paying taxes when there is fairness in tax structure. People are happy when government practices transparency in the implementing policies. People want safety, people want welfare, people want gooinfrastructure, hygiene and people want good quality education.

Corruption undermines government revenue and, therefore, limits the capacity of the government to invest in productive areas.  Corruption distorts the decision-making in public investment projects. It’s been observed the higher the level of corruption in a country, the larger the share of its economic activity that will go subversive, beyond the reach of the tax authorities. Corruption discourages entrepreneurship and innovation; it only encourages inefficiency. It dislocates the human resources.  It creates uncertainty among the citizens. And it diminishes legitimacy in all walks of life and increases crimes.

In all countries there are rich and poor; but when the levels of inequality are low, and the welfare systems are strong, the citizens are happy. People don’t mind paying higher taxes for living a happier life.

The report primarily uses data from the Gallup World Poll. Gallup is a credible polling organization. It is respected highly in media. Nevertheless, all research including polling have some weaknesses which depend on the various methodologies and details of the poll and its questionnaires. Each research has few statistical limitations. Gallup ensures that each annual report is available to the public to download on the World Happiness Report website.

Happiness index is measured using parameters like Housing, Income, Work, Community, Civic Engagement, Education, Environment, Health, Life Satisfaction, Safety and Life-Work balance etc. Each report is organized by chapters that delve deeper into issues relating to happiness. The chapters also include mental illness, the objective benefits of happiness, the importance of ethics, policy implications which lead to subjective wellbeing. The report is based on how strong a country’s social foundation and social trust is.

Bhutan is one of the Buddhist Kingdoms in the World and so far, has preserved much of their culture since the 17th century. Even with globalization, Bhutan follows its Buddhist culture. It allows a certain number of foreigners into the country each year, and the two hundred dollars a day that must be paid by every traveller is a deterrent for many. Internet, television, and western dress were banned from the country up until ten years ago. But over the past ten years globalization has proved to be a challenge to this tiny nation. Things have begun to change, but they are trying to balance things in their own way.

Bhutan is the only country in the world that has a ‘GNH’ which is “Gross National Happiness.” The process of measuring GNH began when Bhutan opened to globalization. It measures people’s quality of life and makes sure that both material and spiritual development happen together in its citizen’s lives. Bhutan has balanced it rightly so far

Conclusion

Happiness is very important to both individuals and as a country. A happy individual is productive and creative. As human beings, although we possess cognitive abilities and are highly “thought” oriented, the quality of our lives is determined by our emotions. The Easterlin Paradox states happiness varies directly with income, both among and within nations, but over time the long-term growth rates of happiness and income are not significantly related. The principal reason for the contradiction is social comparison. A happy human is emotionally strong because happiness protects heart, it strengthens immune system, it helps in combating stress, it found that happy people have fewer aches and pains. The idea that “money can’t buy happiness” is a widely held belief, often attributed to the belief that true happiness comes from things like relationships, personal fulfilment, and a sense of purpose. .  In  the World Happiness Report 2025, India is ranked 118th out of 147 countries.

The Nordic countries comprise of a geographical and cultural region in Northern Europe and the North Atlantic, where they are most commonly known as Norden which literally means ‘The North’. It includes Denmark, Finland, Iceland, Norway, and Sweden including their associated territories Greenland, Faroe Island and Aland Island. The population of the Nordic countries belongs mainly to Scandinavian or Finnish communities. And their main religion is Lutheran Christianity.

The Bloomberg Innovation Index which uses parameters such as research and development spending, value-added manufacturing, productivity and the concentration of high-tech public organizations scores. In its 2017 innovation index has announced Sweden at number two and Finland at number five in the top five! Bloomberg Indiex is called ‘The battle of ideas’.

Every year, the World Economic Forum releases its Global Competitiveness Report on the state of the world’s economies based again on innovations and productivity, which takes into account things like the quality of scientific research at universities, company spending on R&D (research and development), collaboration between universities and industry, patents, and the number of engineers and scientists in each country.

The 2016 ranking by WEF puts Sweden in the top 10 countries for the ease of doing business. The WEF looks at data on areas as varied as the soundness of banks to the sophistication of businesses in each country. It then uses the data to compile a picture of the economy of almost every country on earth. In WEF’s index also Denmark is lauded for its leadership in world for renewable energy technology, with 140% of the country’s energy being met by wind power.

Finland is “well positioned in terms of innovation,” WEF says, with its capacity to innovate supported by the excellent availability of scientists and engineers and a high degree of collaboration between universities and industry. The government funds high amount on R&D as well as corporate innovation projects.

WEF recognizes Sweden for its several high-profile technical success stories over the past decade; WEF thinks that Sweden is well equipped to embrace the Fourth Industrial Revolution, with a strong score on technological readiness and ranked within the top 10 in innovation. However, the availability of scientists and engineers is falling. It is a reminder to the country that renewed efforts are required to invest in human capital and skills to ensure long-term competitiveness and innovation capacity, for which Nordic countries are known.

Since 2008, Cornell University, INSEAD, and the World Intellectual Property Organization release the annual Global Innovation Index (GII). Basically, it’s a list of the most innovative countries in the world. In its 2016 GII index Sweden, Denmark, Iceland and Finland have scored high numbers.

The GII index also recognizes Sweden for its improvements in the basic factors of competitiveness, especially the macroeconomic environment. Sweden’s labor market functions reasonably well and the country is reported to have a high employment rate, with a high level of women’s participation in the workforce. Though WEF index suggests that Sweden has dropped its performance in terms of the effect of taxation on incentives to work, and restrictive labor regulations are perceived as the second-most problematic factor for doing business. In addition, the availability of scientists and engineers is falling, which is a reminder that renewed efforts to invest in human capital and skills are necessary to ensure long-term competitiveness and innovation capacity. What we need to note is that Swedes themselves promote an atmosphere of great personal ambition.

The Nordic countries share a common economic perspective. They are all small, open economies in which foreign trade has great economic significance. These countries have evolved rapidly from poor, agrarian countries into modern industrialized economies among the most competitive countries in the world. The “Nordic model” is therefore considered attractive by other countries in world by both individuals and policy-makers. The model is based transparency, pragmatism and the nationalist spirit among the citizens. These smaller countries are proud owners of large public sectors, including welfare services, and high taxation. And, they have performed so well economically.

Though there are some notes of cautions for these countries such as:  small, open economies are particularly vulnerable to international economic fluctuations. For example, in the financial crisis of 2008, Iceland was hit hard. Though, Finland and Sweden endured severe economic crises in the early 1990s, and Norway experienced a banking crisis around the same time. In the 1980s, Denmark suffered a serious structural crisis that led to the implementation of a comprehensive emergency program famously known as “potato diet”. The crises of the 1990s also led to many structural changes in the Swedish and Finnish economies, and Iceland is now going through the throbbing process of transformation.

But it is really appreciable these small Nordic countries are dominating the innovation indexes in research, infrastructure, institutions, market and business sophistication, and a commitment to knowledge and creativity!! The Nordic countries pride themselves on the honesty and transparency of their governments. A point to note here is that Nordic governments are subject to rigorous inquiry: for example, in Sweden everyone has access to all official records. Politicians are disparaged if they get off their bicycles and into official limousines. Transparency tops the governance of these small yet dynamic countries.

The Nordics have added two other important qualities to transparency: pragmatism and determinedness.  When these countries realized that the old social democratic consensus was no longer working, they let it go with remarkably little fuss and introduced new ideas from across the political spectrum. They were absolutely determined in pushing through reforms. It is stupidity to mistake Nordic geniality as their vulnerability. Pragmatism explains why the new consensus has quickly replaced the old one. Nordic countries can often seem to be amalgams of left- and right-wing policies.

They still have plenty of problems: their governments remain too big and their private sectors too small. Their taxes are still too high and some of their benefits too generous. The Danish system of flexicurity (flexi security) puts too much emphasis on security and not enough on flexibility. Norway’s oil boom is threatening to destroy the work ethic. It is a bad sign that over 6% of the workforce are on sick leave at any one time and around 9% of the working-age population live on disability pensions. But the Nordics are continuing to introduce structural reforms, thought bit slowly, they are continually working on them. The lesson the world should take from them is their ability to invest in human capital and protect them first.