World Happiness Report 2023 79 Introduction In a long tradition – from Jeremy Bentham’s “greatest happiness principle” and onwards – many observers have argued that governments should aspire to raise the happiness of their citizens. Yet, experience suggests that it is a huge challenge to orient the government towards this goal and ensure that it can effectively deliver on it. A key reason is that even benevolent-minded policymakers who would like to pursue a happiness goal may not have the capability to do so. Thus, maintaining internal security and peaceful resolution of domestic conflicts is problematic in many places – between 2006-2016, around 78 percent of the global population lived in countries that experienced civil conflicts, or where individuals were subjected to state repression.1 As for protecting or raising citizens’ well-being, many states fail to provide effective social protection, build necessary infrastructure, and ensure availability of services such as universal healthcare or basic education. So if we are to understand whether a government can effectively pursue happiness as a goal of public policy, we need to appreciate what drives government effectiveness. Early history provides examples of remarkable government achievements – mainly infrastructure investments, like in Mesopotamian irrigation, Egyptian pyramids, Incan temples, or Holy Roman Empire buildings – but effective states with wide-ranging responsibilities only appeared in the past century and a half. The twentieth century saw a remarkable transformation of some states towards a new form of cohesive capitalism, where markets and states came to coexist and promote prosperity and well-being. In contrast to earlier history, many countries not only created benchmarks for state effectiveness, but also became politically open, with competitive contests for power and universally enjoyed political rights and freedoms. For those who would like to promote human happiness, it is thus key to understand the scaffolding that supports the building of such effective states. In the chapter, we show how evidence of overlapping clusters of effective states emerge from the data. We also show how these clusters extend to state activities and levels of well-being. In particular, the beginning of the chapter explores the forces that have shaped the emergence of effective states in two core dimensions: (i) establishing peace and security and (ii) building capacities to enforce laws and regulate markets alongside capacities to fiscally fund programs with universal benefits. Later in the chapter, we argue that focusing on these core dimensions gives useful insights into the link between effective government and well-being. Although effective states today may share key features, we do not argue that these emerged from a common ideal path. Each functioning state has its own unique history, leading to its current circumstances. However, we do highlight certain features, namely institutions, norms, and values that foster political cohesiveness. All societies have cleavages based on different incomes, social classes, regions of residence, religions, or ethnicities. For a state to govern successfully in the presence of such cleavages, it must find ways of bringing citizens together to recognize their common interests and reconcile their conflicting priorities. Institutional arrangements, such as legislatures and independent courts, create a platform for managing conflicting policy interests. Norms of respect and reciprocity can help those in charge of making policy decisions to reach equitable and sustainable compromises. Certain organizational and institutional structures entail weaker incentives to engage in political violence and stronger incentives to expand state capacities – e.g., to build armies or police forces or train cadres of lawyers, doctors, or educators. Following Besley and Persson,2 we label such states as common-interest states. The basic analytical framework presented by these authors illuminates how institutions and norms/values can galvanize universal interests. Aligned interests promote the incentives for building the capacities of the state needed to support a rich array of welfare-enhancing policy interventions as well as a flourishing market economy. Together these state capacities promote peace, prosperity, and happiness. The approach that we suggest also emphasizes that looking solely at links between policy and well-being misses a crucial intermediate
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