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We have abundant evidence that this is so, ranging from the epidemiology of depression to Richard Puttnam's Bowling Alone report on the related theme of trust and community. We know what activities make people happy. By a process of elimination, we also know what factors correlate most with unhappiness, from the mundane (commuting) to the fundamental (insecurity). Now we have to decide what to do with all this information.

What we can't do is nothing. An unhappy society is one in which people feel disconnected from their fellow humans and the institutions we create to keep us from anarchy. That is why trust and happiness are so intertwined. Of course, it is possible for some people to buy their way out of situations they don't trust: gated communities for security, private health and education; the wealthy tend to report themselves as happy rather more than the poorest, probably for this very reason.

Yet the overwhelming majority of people cannot buy themselves out and in any case, the process tends to create, not solve, problems. If we would like our children to grow up in a society not blighted by crime, drug abuse and mental ill-health, we need to understand "happiness economics" better.

The message, according to Professor Richard Layard of the London School of Economics, is pretty simple. The healthiest society is one with a tolerable degree of economic equality, a reasonable degree of stability, a "public realm" that demonstrates our commitment to shared spaces and a higher degree of trust in each other – which in all likelihood flows from the first objectives. He adds to this an urgent need to make mental health services a priority so society can cope better with the pressures it faces.

The government is taking happiness economics pretty seriously. Income inequality is rising – fuelled by obscene increases in boardroom pay – but money is going into tax credits, benefits for the poorest pensioners and families. Despite the furore over schools spending, there is real investment in public services. Overall, crime is falling and not only are police numbers rising but there are many examples of policing being done in a new way.

The healthiest society is one with a tolerable degree of economic equality, a reasonable degree of stability, a public realm and more trust

So far, little of this has affected the public consciousness. The latest poll from MORI/Institute of Public Policy Research shows trust is still on the decline. It may be unreasonable to expect any fundamental shifts after three or four years. However, it is also possible that too many conflicting signals are being sent out, sometimes by the government and sometimes for good reasons, but with unintended consequences.

Two recent examples include the high priority given to benefit fraud, and the housing/housing benefit agenda intended to encourage people to move to the most cost-efficient homes. Neither is intrinsically wrong. Benefit fraud robs us of money that should go to those who need it, and it undermines confidence in the system. Yet make it too much of an agenda and you feed the suspicion that everyone claiming benefits is on the fiddle, which erodes confidence too.

Promoting mobility through financial incentives makes the best use of the housing stock, but also forces families on low incomes to choose between going short or moving house – and geographical mobility does nothing to strengthen the ties of family and neighbourhood. The last thing we should now do is weaken those ties further.