What are the world's happiest countries?

Today, Daniel Bilbao joins us to write about happiness and wealth in the world and Latin America.

Two-time Academy Award winner Denzel Washington was once asked about his success and what he thought of the saying “Money doesn’t buy happiness.”

He laughed and replied: “Well… money doesn’t buy happiness… but it’s a heck of a down payment.”

For years that quote has lived in our brains rent-free. Was that just a funny response to an odd question? Or is there truth behind that statement – and if so, how much?

We know from plenty of psychology and economics studies that the Maslow Pyramid is real: after all, it’s hard to be happy if you’re hungry. One needs first and foremost to cover one’s own basic needs (i.e. food and shelter). But what about after – how is happiness affected by income? Are there diminishing returns? Can one have too much money?

Today at Latinometrics, we bring a fun analysis. In this chart, we plot the relative wealth and happiness of countries and see how our countries fare when compared to the world in these two metrics. We’ve made sure we adjusted for purchasing power parity (PPP) and inflation so as to be as close as possible to a real comparison in wealth amongst nations. The results are fascinating.

Scatter plot comparing countries' GDP per capita and Happiness Index, showing that higher wealth doesn't always correlate with higher happiness.
Wealth & happiness of countries

The least happy country worldwide is also the poorest one, Afghanistan. One could fairly argue decades of war could be a bigger source of unhappiness than poverty; nonetheless, the correlation remains high, as the higher the average wealth the higher a country's happiness.

It’s not a perfect match though. Luxembourg is more than twice as rich as Finland, but the latter’s citizens report more happiness than anybody else.

How does Latin America fare? Quite well, in fact. We’re a happy group of countries no doubt.

Costa Rica has the happiest citizens in the region, followed by Mexico, which is interestingly happier than the US, Canada, Austria, and France, who are not just more prosperous but also have a much higher so-called "quality of life."

Those are the highly positive cases, but even Bolivia, Ecuador, and Honduras, which are lower in a regional context, vastly outperform countries in their same wealth levels.

Maybe Denzel Washington was onto something: money can cushion life’s hurdles, but it doesn’t guarantee joy.