Will Wilkinson gives a well-deserved thrashing to a truly stupid "study" by the New Economics Foundation purporting to show that Vanuatu is the "happiest place on earth."
Here's the short version: They took a measure of each nation's life satisfaction (as measured by happiness surveys and life expectancy) and divided it by a measure of that nation's resource usage. They called the resulting quotient the nation's happiness index. WTF?
An analogy. Suppose you want to rank a group of students from smartest to stupidest. So you need an index of smartness. So you take each student's IQ and divide it by... oh, what the hell, divide by parents' income. Totally arbitrary, right? At best, if income is just unrelated to intelligence, dividing by income adds irrelevant noise to your measurement. And if income is actually correlated with intelligence (say, because smarter people are both more likely to have high incomes and more likely to have smart kids), then you'd be making the smart students look stupider and the stupid students look smarter.
That, in essence, is what the New Economics Foundation did here. There is certainly a positive (though not perfect) correlation between life satisfaction and consumption of resources, so dividing by resource usage is a good way to produce results that bear an inverse relation to, um, the truth.