A view from London

The annual World Happiness Report, co-authored by Lord Layard, ranks 156 countries by their happiness levels based on the results from Gallup World Poll surveys. Finland ranks as the world’s happiest country, followed by Denmark, Iceland and Sweden. Along with the Netherlands, Norway and Switzerland, these countries have featured in the top rank of the happiness league table since its inception in 2012. Afghanistan is at the bottom of the table, in 143rd place, with Lebanon just above. Low-income countries, especially those facing political instability or conflict, tend to register the lowest levels of happiness.

What explains the position of the highest rated countries?

It helps that all are rich, advanced economies with high GDP per capita. This is one of the six factors that the UN has found to support well-being. The top-rated countries also score highly on the other five factors: healthy life expectancy, social support, freedom, trust and generosity.

These influences are themselves a product of income, politics, culture, history and individual behaviour, and can substantially offset the effects of lower income levels. Thus Costa Rica and New Zealand rank above Germany and the US in the happiness league, despite having lower levels of GDP per capita. Conversely, some relatively rich nations, including Japan, South Korea and Singapore, rank well down the happiness league. 

This is a consistent theme across surveys. Relatively low-income Romania scores significantly higher levels of life satisfaction on the EU’s measure than Germany. We see the same picture within countries. The UK’s official measure of welfare shows that levels of happiness and life satisfaction are consistently higher in Northern Ireland than in London.

In the UK, research shows that health and marriage/being in a civil partnership are significant influences on happiness. Having a secure job is also important, and not solely because of the income. Work provides structure, self-esteem and social connections. Across EU member states, people with higher levels of education report higher levels of life satisfaction.

Measures of happiness and life satisfaction, such as the World Happiness Report and those produced by the EU and the UK Office for National Statistics, rely on self-reported welfare. An alternative approach is to assess the ‘liveability’ of cities or countries using third-party data.

Multinational businesses regularly compare cities to understand the cost of living and quality of life for local staff. One tool created to help them with these decisions is the Economist Intelligence Unit’s (EIU’s) Global Liveability Index, which rates the standard of living in 173 cities worldwide. It is an annual survey assessing cities across five categories – economic and social stability, quality of health care, culture and environment, education and infrastructure – to produce an overall ranking.

Western Europe is home to four of the EIU’s top five most liveable cities in the world – Vienna, Copenhagen, Zurich and Geneva – and is the best-performing region in the index. Though assessed in a completely different way, these findings broadly accord with the results of the World Happiness Survey. The EIU’s liveability exemplars enjoy relatively high levels of public spending on housing, health, education, transport and social services. Because residents tend to have lower levels of spending on these services, they have more free income for leisure and cultural activities.

Access to and affordability of housing remains a big determinant of quality of life. Vienna, which was rated the most liveable city in the world for the third year, does particularly well on this. Austria's active social housing policies mean that its housing market is among the least commercialised in Europe. About 60% of Vienna’s population lives in social housing where rents are kept artificially low. This makes rentals affordable, with a recent Deloitte study showing that Vienna's renters pay roughly a third of what their counterparts in London, Paris or Dublin do. (For a critical assessment of the Viennese social housing system, see this week’s Economist magazine.)

Elsewhere, housing shortages have hit the EIU’s liveability ratings. They have pushed Toronto down to 12th position this year, leaving Calgary and Vancouver as the only North American cities among the top ten most liveable. Sydney and Melbourne have also seen their ratings slide for similar reasons but still feature among the top ten.

Another driver of liveability seems to be population size. Cities with relatively small populations, such as Copenhagen, Zurich, Geneva or Vancouver, tend to see lower crime rates and more manageable demands on public services. Many of the largest western cities are not top performers on the EIU index. London is ranked the 45th most liveable city, while Los Angeles and New York are ranked 58th and 70th, respectively. In the UK and the US, other cities performed better, with Manchester ranking two spots ahead of London and Honolulu rated as the best city to live in the US.

As with measures of happiness, conflict and political instability have a predictable effect on the quality of urban life. This is evident towards the bottom of the EIU ranking which is dominated by cities in Africa and the Middle East. War-ravaged Damascus is rated as the least liveable city in the world, its position constant since 2013. Tripoli, Algiers and Lagos follow Damascus, with political instability as their primary affliction. The war in Ukraine has kept Kyiv in the bottom ten for the second year running, while Tel Aviv has seen its position slide sharply this year.

Conspicuous by their absence so far are cities in the two largest and fastest-growing emerging markets – China and India.  China's higher income economy enables it to spend more on its cities than India. As a result, they fare comparatively better. Ranking 81st, Beijing is the most liveable city, with good standards of education and healthcare. Given lower levels of per-capita GDP and high population densities, Indian cities feature closer to the bottom of the rankings, with Delhi and Mumbai tied at 141st rank.

There is, of course, no complete measure of human welfare. The EIU measure provides a useful measure of the quality of life for expatriates and, as such, excludes elements, such as political conditions, which matter for nationals. Hong Kong, for instance, ranks above New York or Los Angeles in the EIU index, despite the absence of political freedoms that are taken for granted in North America and western Europe.  

Much of what contributes to happiness lies beyond the control of individuals. Where and when you are born and your family environment matters. Yet individuals, especially those in richer, freer countries, have significant agency. The more an individual identifies with family, friends and colleagues the happier they tend to be. Education enriches life. Prosaic changes really make a difference. Exercise and reducing time spent on social media contribute to happiness. Reduced commuting times are associated with higher levels of welfare.  Researchers at the OECD have suggested that for those with the wherewithal paying others to do your chores reduces stress.

There is, in short, much we can do to assist ourselves in what the US Declaration memorably dubbed the “pursuit of happiness”.