Bhutan is a mountainous small country bordering on India and China. The country is a constitutional monarchy with an elected parliament. Bhutan is special because its leaders seek to preserve the natural environment and the traditional culture as elements of happiness while the economy develops.

The main industries in Bhutan are agriculture, forestry, tourism, and hydroelectricity. The government exerts tight control over foreign investment, in order to preserve the country's traditional culture. But the limits on investment have kept most of the people poor; most of the residents still do not have electricity. Seeking to avoid disrupting its culture, Bhutan has also prevented mass tourism. Tourists are required to spend at least $200 per day, and are required to travel only on guided or planned tours.

While economically poor, the government leaders, including the king and the prime minister, consider Bhutan to be culturally and environmentally rich. The constitution of Bhutan mandates that forests cover at least 60% of the territory. Instead of measuring well-being only with the usual gross domestic product, the leaders of Bhutan use a gross national happiness index.

The 1729 legal code of Bhutan declared that “if the Government can not create happiness for its people, there is no purpose for the government to exist.”

The concept of GNH was introduced in 1972 by King Jigme Singye Wangchung, who sought to integrate economic growth with Buddhist spiritual values. Bhutan is the world's only Buddhist kingdom. The concept of national happiness is ancient; the 1729 legal code of Bhutan declared that “if the Government can not create happiness for its people, there is no purpose for the government to exist.”

Happiness in this concept is not temporary pleasure, but a lasting satisfaction from a life in harmony with nature, humanity, and the cultural heritage. Happiness has become a topic of research in economics, using surveys to measure how happy people are. In 2011 the United Nations General Assembly added “happiness” to its development agenda.

As a political goal for Bhutan, happiness is promoted by sustainable development, the preservation of cultural values, the conservation of the natural environment, and the establishment of good governance.

As a political goal for Bhutan, happiness is promoted by sustainable development, the preservation of cultural values, the conservation of the natural environment, and the establishment of good governance. The Gallup poll has created a Well-Being Index that includes health, behavior, and access to services, and nine domains: psychological well-being, health, time use, education, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards. To help understand and promote happiness, the Centre for Bhutan Studies and GNH Research was established in 1999. The government of Bhutan also established the Gross National Happiness Commission.

The Centre for Bhutan Studies has published “A Short Guide to Gross National Happiness Index,” available in pdf. The Gross National Happiness Index is a single number generated from 33 indicators, with four categories: unhappy, narrowly happy, extensively happy, and deeply happy. In 2010, 8 percent of the people of Bhutan were found to be deeply happy, 33 percent extensively happy, 49 percent narrowly happy, and 10 percent unhappy.

The danger in applying a national happiness concept is that it could result in a despotic utilitarianism, the greatest happiness for the majority, even if minorities are unhappy. Bhutan has several ethnic groups, with their own cultures and languages. In the 1990s, Bhutan expelled many of its ethnic Lhotshampa population, which was moved to refugee camps in Nepal. They are not happy about that.

Even when they have a common culture, individual persons have their own desires and preferences, possibly different from the prevailing culture. The preservation of cultural preferences may promote more happiness among the majority, but result in unhappiness in a minority. For example, if the culture disapproves of gambling, some individuals may nevertheless enjoy gambling games. A happiness policy that seeks to preserve the cultural bias against gambling may maximize total happiness at the expense of unhappiness in the minority that enjoys games of chance.

Restrictions on economic development, aimed at preserving the culture, may stifle individual entrepreneurship that could end up making many people happy with better economic opportunities in products and employment. Another possible danger is that a happiness goal may be used to excuse poor economic performance.

The 2015 Index of Economic Freedom by the Heritage Foundation measures Bhutan at 57 out of 100. The score for property rights is 60, with only 20 for investment freedom. (The Fraser Institute's economic freedom index does not include Bhutan.)

The government of Bhutan obtains substantial revenue from hydropower. There are also taxes on income, goods, trade, and property. The top income tax rates are 30 percent for business and 25 percent for individuals. There is a 5 percent tax on property transfers. The property tax applies to land, buildings, and cattle.

Bhutan’s National Land Commission has been revising the land tax rates to obtain revenue, prevent speculation, and reduce the concentration of land holdings. Taxes on real estate vary; the rate for the capital city, Thimphu, is 7 tenths of one per cent.

Bhutan’s economy and national happiness would be greatly enhanced by a tax reform that eliminates taxes on income, exchanges, goods, and buildings, and replaces them with a tax on land value that taps about 85 percent of the ground rent, and with taxes on pollution and other environmental damage. A high tax rate on land rent or land value would achieve the goals set by the Land Commission. The negative effects of economic development can be best handled directly, rather than limiting overall growth with taxes that hamper business and raise prices.

Happiness should be regarded as highly individual, as attempts to enforce conformity reduces the happiness of minorities and ultimately stifles the happiness of the majority as influential minorities use controls to promote their interest as the expense of others.

The goal of good governance can be best achieved with a decentralization of governance, as mass voting by political parties can result in favoritism and strife. Happiness should be regarded as highly individual, as attempts to enforce conformity reduces the happiness of minorities and ultimately stifles the happiness of the majority as influential minorities use controls to promote their interest as the expense of others. Gross National Happiness is a worthy goal, and Bhutan should be praised as initiating a model. The people of Bhutan should be careful to implement happiness so that individual freedom is not obliterated.