Does money buy happiness? Maybe a better question is whether a system that allows productive activity to generate wealth generates happiness. Anyway, an article at NewScientist.com answers in the affirmative. Excerpt:

Large industrialised countries fared well in the new analysis, with the US and UK coming in at 23 and 41, respectively, out of 178 nations. This stands in contrast with the recently released "Happy Planet Index" from the New Economics Foundation think tank, which placed Columbia (sic) and Honduras high up.

How did the "Happy Planet Index" reach its (to me) unexpected conclusion? The HPI is computed as follows:

HPI = (Life satisfaction x Life expectancy)/Ecological footprint.

This imposes an elasticity of -1 on income, assuing that "ecological footprint" and income vary more or less proportionately. This way you can conclude that Palestinians (52.6) are happier than either the Swiss (48.3) or the Israelis (39.1). Likewise, Americans (28.8) are less happy than Mexicans (54.4) or Guatemalans (61.7). I guess that explains why the Mexican and Guatemalan governments can't keep out those damned American immigrants. By the way, citizens of Nigeria (31.1), Congo (41.8), Burma (44.6), and Vietnam (an amazing 61.2) are happier than Americans.