Danish happiness is not caused by the welfare state

In some of the most unlikely places in the world, people know that Denmark is the happiest country of all countries covered by international surveys. Politicians and ordinary people are therefore asking what makes the Danes so satisfied with their lives. The topic also occasionally pops up as an issue in political discussions in the UK and US, as well as in Denmark itself. The policy implications that politicians in most places draw from the simple observation that Denmark most years has the top spot are nevertheless wrong. Danish happiness has nothing to do with the welfare state.

People reach the erroneous conclusion by combining two well-known observations: Denmark is the happiest country in the world, and Denmark – as one of the three Scandinavian countries – has one of the largest welfare states in the world. As Swedes and Norwegians are also among the happiest populations, it is easy to surmise that the welfare state creates happiness. It is, however, demonstrably wrong and the simple picture arises because the some of the same factors that allow the Scandinavian welfare states to exist this side of bankruptcy also create happiness. In technical terms: the correlation between welfare state size and happiness is spurious.

While plenty of politicians and political commentators claim that welfare policies create happiness, it has been a strangely well-kept secret in happiness studies since Ruut Veenhoven first published a paper on the topic in 2000 that they don’t. Veenhoven set out to estimate how much happiness is created by the welfare state, clearly expecting a substantial positive effect, but found a zero. Most subsequent studies have recreated the zero while several recent studies also find that while redistribution does not generate happiness, non-redistributive policies in countries with larger government sectors are in general associated with lower levels of happiness.

In a particular Scandinavian context, it is also easy to see how the welfare state logically cannot be associated with happiness. The Social Democrat governments of Denmark headed by Poul Nyrup Rasmussen did more to reform the welfare state and roll back some of its most generous policies in the mid-1990s than any subsequent government. Yet, as is evident in the figure below, nothing happened to Danish happiness in those years. Similarly, Sweden deregulated markets, reformed parts of the government sector and substantially reduced taxes and expenditures in the mid-1990s without experiencing any changes in happiness. The only effects of these policies, which would have been vilified as ‘neoliberal’ had they been implemented anywhere else than in Scandinavia, simply seem to have been a change in the expectations that people have of what the public sector delivers to the population in return of the taxes paid by the same population.

Lykke over tid dkIf the welfare state does not create happiness, what is then the key to understanding Danish happiness? The answer can be found in the cultural fabric of the country, and particularly in two factors. The second figure illustrates the importance of the two features that do explain why Denmark, and not some other rich, democratic nation, has the happiest population in the world: having the combination of one of the highest trust levels in the world and the highest share of people stating that they are free to choose the life they want.

lykke tillid frihed dkWhen asked if you can in general trust other people, or if you have to be careful, about 70 % of Danes respond that you can trust other people. While Norwegians and Swedes share the Danish trust level, the global average is 27 %, and even in well-functioning neighbouring countries like Germany and the United Kingdom, ‘only’ about 40 % declare that they trust most of their fellow citizens. In terms of trust in other people – but no trust in government – Scandinavia is head and shoulders above the rest of the world. Similarly, when Gallup asked people about their freedom to choose the life they want to lead, Denmark turned out to be the freest country in the world. 94 % of Danes (and 93 % in Norway and Australia) stated that they were free to choose. While the welfare state makes the Danes less economically free, their perception of how socially free they are – their personal freedom – ranks among the strongest in the world.

At the end of the day, the confusion of why the Danes are so happy comes from the fact that what matters is what you don’t get used to. Denmark is a country in which a welfare state built by incredibly greedy politicians who hunger for popularity and votes can actually be funded – at least for the time being. But what makes the Danes happy are features that you don’t read about in the newspapers or hear about on NBC: the trust in fellow citizens and sense of personal freedom is something that people only come to discover if they visit the country or if Danes suddenly experience what it is likely to live in a country without that trust.

When a Danish woman a few years ago got arrested in New York for leaving her sleeping baby in a pram on the sidewalk outside the café where she was having lunch, she did what Scandinavians do every day. Until a journalist wrote about it, the American public treated her like a horrible mom because they couldn’t imagine a country where people could do that. Likewise, it can be difficult to imagine a country where you’re not only free to have whatever religion you like, but also free to be free from religion. Those things have nothing to do with the state, and everything to do with the Danish ‘menneskesyn’ – the way we see other people. I’m happy that the welfare state didn’t change that!

12 thoughts on “Danish happiness is not caused by the welfare state

  1. Kjeld Flarup

    Det er vel den selvsamme tillid, som gør accepten af velfærdsstatens høje skattetryk muligt.

    Strengt taget ville jeg mene at velfærdsstaten påvirker lykken negativt, når man når grænsen, altså man skal se på integralet af velfærden.

    Et spørgsmål som så trænger sig på, er hvad der kan undergrave tilliden. Den store indvandring fører jo mange ind i landet uden samme tillid i kulturballasten, men det ser i følge dine grafer ikke ud til at påvirke, eller hvad?

  2. LeviLevi Russell

    “Likewise, it can be difficult to imagine a country where you’re not only free to have whatever religion you like, but also free to be free from religion.”

    I can’t think of a country in the west that forces someone to believe a religion.

    1. Christian Bjørnskov Forfatter

      There are no Western countries that force people to believe in some or a particular religion. My point is that in some countries, not having religious beliefs is a_social_taboo. Being irreligious is clearly a social problem in parts of the US, as well as Malta and Turkey.

      1. Levi Russell

        I’ve lived in the US my entire life and haven’t seen that. I’ve been lambasted in internet forums by atheists for daring to be religious though.

        1. Christian Bjørnskov Forfatter

          My cousins have lived their entire lives in the US, and while it is not a problem for the one in Washington, it is for the other one who’s married to a girl from Georgia and who lives in New Mexico.

  3. Uffe

    Christian, a question for the professor:

    It is permissible to say that the state interventions in the marketplace (taxation, regulation etc.) has negative effects, but if combined with redistribution the negative effects are cancelled out?

    If this is so, what does this mean in respect to “pareto optimality”? More precisely, does it mean that if you could imagine a state which only redistributes and doesn’t interfere with the market except for taxation, would such a state improve happiness in society?

    Is it permissible to say that forced redistribution from rich to poor by taxation by the state can improve happines in society?

    1. Christian Bjørnskov Forfatter

      No, that’s actually not permissible. The serious literature shows tht redistribution has_no_effects. Taxation also seems to have zero effects. So there are no effects that cancel each other out, and no positive effects other than whatever it takes to secure peace and effective property rights protection.
      But we do see negative effects when focusing on what is known as ‘government final consumption expenditure’ – that is how much economic activity is handled by the government. The government – and most likely in particular central government – is just really bad at delivering any kinds of private goods.

      1. Uffe

        Thank you very much for your reply Christian.

        Based on your reply, it seems to me that the classical liberalism wasn’t such a bad idea after all 🙂

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