Happiness is as hard to define as it is to achieve. Everybody wants to be happy. Even masochists. I think it is best to use a non-constructive definition:
Happiness is the goal that drives all human actions and desires.
If long term happiness if everybody's ultimate goal, then it is worth learning how to achieve long term happiness. In fact, if being happy is the ultimate goal (as opposed to say, being wealthy), then our education system should also be teaching us how to be happy over a life time, rather than purely technical or vocational skills. Simple GDP growth does not imply an increase in the happiness of a society -- as indicated by data from the last ~40 years in the US, comparing per capita GDP and happiness levels:
While per capita GDP has risen more or less steadily, happiness levels have remained more or less stagnant in the last ~40 years.
Should countries develop public policy with the goal of making a society happier, rather than with the goal of increasing GDP? I think it is an idea worth exploring (Scandinavian countries seem to rank highest in in the world in happiness scores, despite high taxes). The government of Bhutan came up with the Gross National Happiness index, which measures the average life satisfaction of the citizens in a country.
This correlates well with health, access to education, and wealth (GDP per capita). At any given time, the relationship between average happiness of a country and per capita GDP seems to log-linear, meaning that happiness is roughly linear in the log of the per capita GDP.
This is because in order to increase the happiness level of a society by 1 unit, the increase in wealth required is proportional to the current welath. For e.g., if the required amount of increase in personal wealth for a group with per capita income of $1000 is $x, then it is $10x for a group with per capita income of $10,000.
Near the end of this talk, Daniel Kahneman says that in a study done with the Gallup organization, he found that:
Below an income of … $60,000 a year, people are unhappy, and they get progressively unhappier the poorer they get. Above that, we get an absolutely flat line. … Money does not buy you experiential happiness, but lack of money certainly buys you misery.
Kahneman distinguishes between two types of happiness: that of the experiencing self and that of the reflecting self. It is possible to be happy in the experiencing self but have a poor happiness score when reflecting on a long time frame in the past, and vice-versa. For the type of happiness that measure life satisfaction in retrospect, there is no flat time -- i.e. it continues to increase with increasing wealth. I don't find this too surprising. It is the difference between short term and long term happiness. It is easy to be happy in the short term at the expense of the long term. On the other hand, tolerating displeasure during hard work in the present can have a huge payoff in long term happiness in the future.
In this TED talk, Dan Gilbert showcases his research that shows that happiness can be synthesized by individuals. So happiness is not some finite resource that needs to be distributed among people, instead one can simply choose to be happy, despite seemingly adverse conditions. This is fascinating, because it provides experimental evidence that happiness has to do not just with our external circumstances (such as GDP per capita), but also with how we process information in our minds. Several religions have the concept of expressing gratitude. The act of being grateful basically synthesizes happiness out of thin air.