One of the most important indicators of a thriving economy and healthy society is that the people living in the country report high levels of happiness, life satisfaction and wellbeing.
All of the ten countries with the highest levels of average life satisfaction, as reported by in the annual World Happiness Report, are small advanced economies. Finland has been ranked as having the highest life satisfaction for the last five years, followed by Denmark, Switzerland, Iceland and the Netherlands.
The UK is 17th in the list of ahead of many advanced economies, but behind the Nordic countries and other small advanced economies. Scotland is not ranked separately from the UK but other evidence suggests that Scotland has similar levels of life satisfaction as the rest of the UK.
The World Happiness Report has identified six variables that explain many of the differences between countries. For three of the six variables, the UK and Finland are very similar: GDP per capita, social support and healthy life expectancy at birth. For one variable, generosity, the UK does better than Finland.
There are two variables that seem to explain the gap between Finland and the UK. One is that in Finland, people are more likely to believe that they have freedom to make life choices (that, is high levels of agency) and the other is that perceptions of corruption are much greater in the UK than in Finland.
To put that into perspective, if an independent Scotland had the expected higher levels of agency and the powers to tackle corruption, we are likely to achieve life satisfaction levels as high as Finland, the ‘happiest country in the world’.
Measures of Success
The Bottom Line aims to invigorate and elevate the debate on the economics of Scottish independence by setting out how and why independence will deliver economic benefits and also the costs to Scotland associated with economic dependence on the UK.
The Bottom Line launched with a paper of agency and helplessness. Our perspective is that just as individuals are more likely to flourish if they are in control of their lives than if they feel helpless and dependent on others, so nations that have the power to make decisions to shape their future can build thriving economies.
This raises the question of how we measure whether an economy is thriving. The most common measure is gross domestic product (GDP), a measure of the monetary value of the goods and services produced within a country during a year.
When the GDP measure was created it was never intended to measure wellbeing or social progress. Indeed, Simon Kuznets, one of the architects of GDP understood its limitations, which he made clear in a report to the US Congress  in 1934, before such measures were adopted.
“The welfare of a nation can scarcely be inferred from a measurement of national income.”Simon Kuznets (1934)
In 1968 Robert Kennedy made a speech that was not widely reported at the time but has become well known since, in which he noted that GDP (or rather gross national product, the terminology more commonly used at the time) does not capture what is most important.
“The gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.”Robert Kennedy (1968)
As far back as the 1970s, it was shown that there was not a strong correlation between GDP growth and levels of happiness in a nation . This is also true at the individual level, where increased income does not lead to increased happiness, apart from at low levels of income.
Some of the critiques of GDP are overblown. Whilst many governments have assumed that a stronger economy, as measures in GDP terms, will likely boost re-election prospects, no government has focused solely on GDP growth. There have always been other measures or objectives, whether that be reducing unemployment or improving housing, education or health.
GDP also matters for public finances. Taxation revenues must be raised from the income and wealth that can be measured in monetary terms. So it is not surprising that governments will want to increase GDP, since that will be associated with the taxation revenues that are needed to fund good quality public services – and to service the interest and reduce the public sector debts built up in difficult times, including during the Covid pandemic.
However, it does matter what is measured. The Nobel Laureate (and former member of the Scottish Government’s Council of Economic Advisors), Joseph Stiglitz has highlighted the importance of choosing the right measures for the economy.
“Getting the measure right is crucially important. If we measure the wrong thing, we will do the wrong thing. If our measures tell us everything is fine when it really isn’t, we will be complacent.”Joseph Stiglitz (2019)
The idea that happiness and wellbeing should be the purpose of society and a priority for government is not a new one.
Aristotle argued that the ultimate goal of society should be to promote eudaimonia, which can be literally ‘a state of good spirit’, and in modern terms ‘human flourishing’. Adam Smith also had much to say about happiness, particularly in ‘The Theory of Moral Sentiments’.
The ‘pursuit of happiness’ is included in the constitution of the United States and two hundred years ago President Thomas Jefferson was arguing that happiness should be the primary objective of government.
“The care of human life and happiness and not their destruction is the only legitimate object of good government.”Thomas Jefferson (1809) 
Bhutan has been pursuing “gross national happiness” (GNH) rather than GDP since the early 1970s, with an increasingly sophisticated approach to measuring progress towards greater GNH.
In recent years, the Scottish Government has been amongst the pioneers in this area and has been working with other governments with similar perspectives: the Wellbeing Economy Governments (WEGo), which also include Finland, Iceland, Wales and New Zealand.
Creating a Wellbeing Economy
The defining vision of the Scottish Government, as set out in its economic strategy , is to establish a “wellbeing economy”.
“Our vision for 2032 is to create a wellbeing economy: a society that is thriving across economic, social and environmental dimensions, one that delivers prosperity for all Scotland’s people and places.”Scottish Government (2022), National Strategy for Economic Transformation
While there is no globally agreed definition of a “wellbeing economy”, there is a consensus that it should take account of sustainability and fairness as well as material standards of living.
There are two main approaches to measuring wellbeing. One is to identify a range of factors that are correlated with wellbeing. This is the approach that has been taken in Scotland, with the National Performance Framework (NPF), which monitors progress towards 11 “national outcomes” that are directly linked to wellbeing. These relate to childhood experience, community empowerment, culture and creativity, the economy, skills and education, the environment, fair work, health, human rights, international connections and poverty and inequality.
The other approach to measuring wellbeing is to ask people.
Asking People About Wellbeing
If the purpose of government is to increase the wellbeing of its citizens, it must have some understanding and measure of wellbeing in the population. Over the last decade or so, government statisticians in many advanced economies have been undertaking surveys to measure and track wellbeing.
The UK’s Office for National Statistics publishes the findings of population sample surveys that ask questions about how people feel about their lives, as part of a broader measure of wellbeing indicators. The questions that are asked are:
– Overall, how satisfied are you with your life nowadays?
– Overall, to what extent do you feel the things you do in your life are worthwhile?
– Overall, how happy did you feel yesterday?
– Overall, how anxious did you feel yesterday?
The survey is undertaken monthly and people are asked to respond on a scale of 0 to 10, where 0 is “not at all” and 10 is “completely”. The mean scores for life satisfaction, worthwhileness and happiness have been between 7 and 8 since the survey started in 2011, with the mean score for anxiety around 4.
Between 2011 and 2019, the mean scores were on a trend of marginal improvement, although in 2020, during Covid lockdowns, there were sharp declines in all measures, and a marked increase in anxiety. Whilst there has been improvement in the most recent surveys  levels of wellbeing have not recovered to the levels seen before the Covid pandemic.
The Office for National Statistics data also provides evidence on the differences across the UK countries. However, that tends to show that average wellbeing scores in Scotland are similar to the UK as a whole. For example, in 2020-21 the average life satisfaction score for both England and Scotland was 7.38.
The Happiest Countries in the World
Comparisons are also available across countries, which gives governments an understanding of how levels of self reported wellbeing compare internationally. For example, the 2022 World Happiness Report  ranked Finland as the happiest country in the world (for the fifth year running), followed by Denmark and Switzerland, with the UK ranked seventeenth and Afghanistan, Lebanon and Zimbabwe as the least happy of the 146 countries ranked.
This is based on the Gallup World Poll, which asks respondents in countries around the world to evaluate their current life as a whole on a scale of 0 to 10. The World Happiness Report uses a three year average of national averages on life satisfaction to rank countries.
The most striking thing that can be seen in the ranking of those countries with the highest average levels of life satisfaction, is that all of the top 10 are small advanced economies.
Whilst these findings are reported in the World Happiness Report, it is worth noting that they are based on life satisfaction evaluations rather than positive emotions. Gallup also publishes a positive experience index , based on surveys where respondents are asked about whether they experienced enjoyment, felt well rested and smiled or laughed a lot. This index tends to be dominated by Latin American countries, although Finland, Denmark and Iceland are usually in or close to the top 10.
How Do We “Get to Finland”?
If the purpose of government is to increase wellbeing, then it is necessary to understand the factors that can make a difference and which of these factors that government policies and public services have the potential to influence.
Finland is ranked first for life satisfaction in the World Happiness Report and so is often called ‘happiest country in the world’. The question that arises is whether there is anything that we can learn from Finland’s life satisfaction: how do we get to Finland? There are many routes to life satisfaction, just as there are many routes that can be taken on a physical journey to Finland. However, it is worth examining why Finland is ranked first in the world for wellbeing. What is it about Finland that is different from Scotland and the UK?
The World Happiness Report does more than rank countries according to reported life satisfaction. The Report has identified six variables that seem to explain many of the differences between countries:
– GDP per capita
– social support
– healthy life expectancy at birth
– freedom to make life choices
– perceptions of corruption
These do not explain all of the differences, but each of these variables seems to contribute something to happiness.
If we compare Finland and the UK, on three measures the two countries are very similar: GDP per capita, social support and healthy life expectancy at birth.
On one measure, generosity, the UK does better than Finland. There are two differences that seem to explain the gap between Finland and the UK. One is that in Finland, people are more likely to believe that they have freedom to make life choices, also known as agency. The other is that perceptions of corruption are much greater in the UK than in Finland. A higher ‘score’ for perceptions of corruption in Finland means that people are less likely to think there is much corruption.
Life Satisfaction Scores and Explanations: Finland and the UK
Focusing on the two variables of agency and corruption where there are markedly better scores for Finland, independence will, by definition, result in greater agency and will mean that Scotland will be able to tackle and reduce corruption.
The links between independence and agency, as well as between dependency and corruption have been explored in two previous posts:
Agency: the importance of agency (https://thebottomline.scot/agency-and-helplessness-and-scotlands-future/), setting out how independence would stimulate a move to a society of agency; and
Corruption: high levels of corruption in the UK as one of the costs of dependence (https://thebottomline.scot/corruption-the-price-of-dependency/), highlighting state capture of the UK and the need for independence to tackle corruption.
If an independent Scotland had the expected higher levels of agency and the powers to tackle corruption, we are likely to achieve life satisfaction levels as high as Finland, the ‘happiest country in the world’.
 Simon Kuznets (January 1934), National Income 1929-1932, National Bureau of Economic Research Inc, Bulletin 49
 Robert Kennedy in a campaign speech at the University of Kansas on 18 March 1968
 Known as the “Easterlin Paradox”, see for example: Richard Easterlin (1974), Does Economic Growth Improve the Human Lot? Some Empirical Evidence (in Nations and Households in Economic Growth: Essays in Honor of Moses Abramovitz)
 Joseph Stiglitz (24 November 2019), The Guardian (It’s time to retire metrics like GDP. They don’t measure everything that matters)
 Thomas Jefferson in a campaign speech in Maryland in 1809
 Scottish Government (2022), National Strategy for Economic Transformation
 Office for National Statistics (31 October 2022), Personal well-being in the UK: April 2021 to March 2022
 Helliwell, Layard, Sachs, De Neve, Aknin & Wang (Eds.), World Happiness Report 2022 (Sustainable Development Solutions Network)
 Gallup (2022), Gallup Global Emotions
Appendix: World Happiness Report Variables That Explain Differences Between Countries
The World Happiness Report has identified six variables that seem to explain many of the differences between countries:
GDP per capita: economic output, measured in per capita terms, adjusted for Purchasing Power Parity, based on data from the World Bank’s World Development Indicators
Social support: based on data from the Gallup World Poll, answers to the question: “If you were in trouble, do you have relatives or friends you can count on to help you whenever you need them, or not?”
Healthy life expectancy at birth: based on data from the World Health Organization Global Health Observatory data repository
Freedom to make life choices: based on data from the Gallup World Poll, answers to the question: “Are you satisfied or dissatisfied with your freedom to choose what you do with your life?”
Generosity: based on regression analysis of GDP per capita and data from the Gallup World Poll, answers to the question: “Have you donated money to a charity in the past month?”
Perceptions of corruption: based on data from the Gallup World Poll, answers to the questions: “Is corruption widespread throughout the government in this country or not?” and “Is corruption widespread within businesses in this country or not?”