I have completed reading The Rational Optimist, which I talked about in a post earlier this week already. Matt Ridley has lots of very interesting ideas ranging from sensible responses to global warming to the reasons that humankind managed to dominate the Earth. The major recurring theme in the book is that trade is the single most dominant driver of civilization, scientific advance and economic growth. Trade is defined by both exchanging of goods and ideas and after reading the whole book I find his position hard to refute, though perhaps he oversimplifies a little here and there.
The thing that it made me think about was the idea that economic freedom creates prosperity and happiness independently. People are much happier in situations where they have the freedom to move around as they please, marry who they want and earn their living in the way they enjoy and these sorts of freedoms also bring economic and scientific growth. If we look at governments in the past we see a very stark trend that those that allowed their citizens substantial freedom in their lives and protected their rights, in particular property rights, prosperity and innovation followed. The reverse is true of oppressive regimes that restrict their citizens freedoms and do not respect their individual rights - in these cases little in the way of economic growth or scientific advance followed.
The trick here is that we would like to know how much economic prosperity affects people's happiness. Rich countries are consistently happier but rich countries are also usually democratic and the citizens of those countries have extensive rights that are usually respected. Even if democracy, free thought and an open market did not create wealth I would expect that any country sporting these institutions would be happier than one that does not by a significant margin. The other trick is that happy people become richer. If you treat mental disorders, drug addiction and other causes of unhappiness in society you create opportunities for those people to take part in the economy productively and become richer. Also, those that are happy due to other factors are naturally predisposed to becoming wealthy. People with supportive networks of family and friends, good money handling and social skills and a comfortable upbringing have a massive advantage in the job market and also are going to be much happier than those without. They are going to be both happy and relatively wealthy even if no correlation existed. The same applies to achieving a state of flow - doing a hard job that suits one's skills is rewarding in both smiles and cash.
None of this proves that happiness and wealth are not correlated above the middle class, and it also doesn't prove the reverse. Unfortunately for our understanding this topic is incredibly complex and answers are extremely difficult to tease out of the data we have. Fortunately it isn't necessary to determine that answer to arrive at good public policy since there still are many people that don't have enough money to get themselves above the theoretical happy minimum in Canada, never mind in Africa and elsewhere. Economic prosperity will definitely allow us to increase the happiness of our own country and improve the lives of people elsewhere in the general sense, regardless of whether or not it actually makes sense from an individual perspective to pursue wealth as a means to that end.