There are substantial differences in happiness in nations. Average happiness on scale 0-10 ranges in 2006 from 3.24 in Togo to 8.00 in Denmark and the inequality of happiness, as measured by the standard deviation, ranges from 0.85 in Laos to 3.02 in the Dominican Republic. Much of these differences are due to quality of governance and in particular to "technical" quality. Once a minimum level is reached, rising technical quality boosts average happiness proportionally. Good governance does not only produce a higher level of happiness, but also lowers inequality of happiness among citizens. The relation between good governance and inequality of happiness is not linear, but follows a bell shaped pattern, inequality of happiness being highest in nations where the quality of government is at a medium level. The relation between the size of government and average happiness depends heavily on the quality of government; good-big government adds to happiness but bad-big government does not. Possible explanations of these findings are discussed. (Contains 14 footnotes, 2 tables, and 4 figures.)