The evidence on higher levels of happiness in Nordic countries has been long and persistent. Could it have something to do with them having less social inequality (less envy and resentment) and more ethnic cohesion (although that is changing)?
As Will Wilkinson’s excellent recent paper on happiness research notes, it’s hard to find consistent results on the well-being consequences of income inequality. As Will argues, one reason for the mixed findings is that the effects of various factors on happiness are ‘culturally and ideologically mediated’. So the impact of income inequality will depend on how intrinsically important equality is seen to be, how justified the differences that are perceived to exist are seen to be, and how people perceive their own prospects. If people in Nordic countries value equality highly, and that is what their society produces, that might help explain why they do well in happiness and life satisfaction surveys.
This does not, however, mean that their model can be easily transposed elsewhere. Other countries with fairly low income inequality like Germany consistently do quite poorly in surveys of happiness and life satisfaction. A 2003 paper by Rafael Di Tella and Robert MacCulloch (can’t find a link) showed income inequality and happiness inequality trends over the period 1975 to 1995 and found that while income inequality rose in the US and Britain happiness inequality was stable or falling.
An important point that Will makes in his paper (and in his Policy article last year) is that while status does matter it is a mistake to focus so heavily on the relationship between income and status. It is only one dimension of status, and not necessarily the most important one. As he puts it:
…while the number of positions on any single dimension of status may be fixed, there is no reason why dimensions of status cannot be multiplied indefinitely. It does not in fact require a violation of mathematical law to produce more high-status positions, for it is possible to produce new status dimensions.
New dimensions of excellence and status often open up due to technological innovation. It was impossible to be a chart-topping pop star or a champion triathalete before there were radios and bikes. Liberal market societies not only create new technologies, they create proliferating forms of association, affiliation, expression, and identity at a sometimes alarming rate. Each musical genre, each hobby, each committee, each church, each club, each ideology, each lifestyle provides a new dimension—a new frame of reference—for positional competition. Environmental purists can compete with one another to conspicuously consume eco-friendly products (or conspicuously refuse to consume much at all), while punk rockers duke it out on grounds of anti-establishment authenticity, and economics professors knock themselves dead trying to get articles into esoteric journals no one else cares about.
So even where ‘social inequality’ matters, income inequality is not necessarily a good proxy measure, because it misses many dimensions of status that may actually matter more to people’s well-being.